2025-VIL-41-AAAR
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SGST AAAR

GST – Gujarat AAAR - Eligibility of ITC on expenditure incurred on buy back of shares - Whether the impugned ruling by Authority for Advance Ruling holding that the applicant-assessee is not eligible to avail the ITC involved in the expenditure incurred for buyback of its shares and is also required to reverse the ITC on common inputs and input service used in relation to the expenditure incurred for buyback of share, is correct or otherwise – HELD - It is trite law that for entitlement of input tax credit, the goods or services or both should be intended to be used for the business or in its furtherance thereof. However, this does not mean that the tax paid on every activity used in the furtherance of business is eligible for credit – The Section 17(2) of the CGST Act, 2017 restricts the input tax credit to taxable supplies including zero rated supplies. It categorically denies input tax credit of goods or services or both used for effecting exempt supplies - Shares being securities, are neither goods nor services. Therefore, a transaction in securities, is not a supply in GST and hence not taxable. The Section 17(2) restricts allowance of input tax credit of goods or services or both to the extent of expenses attributable to taxable supplies. Therefore, any tax paid on goods or services or both used for transaction in securities, which is not even a supply under GST, is not allowed as input tax credit – Further, the argument that the buyback activities are in the course of furtherance of business is irrelevant, as the law specifically excludes transactions in securities from the ambit of ITC - The appellant is not eligible to avail ITC involved in the expenditure incurred for buyback of its shares. The appeal is dismissed - Whether the appellant is required to reverse the ITC on common inputs and input services used in relation to the expenditure incurred for buyback of shares - HELD - The provisions of Section 17(3) of the CGST Act includes the "value of transaction in securities" in the value of exempt supply, thereby mandating the reversal of ITC attributable to such transactions. The appellant is required to reverse the ITC on common inputs and input services used in relation to the expenditure incurred for buyback of shares.
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