2026-VIL-27-AAAR
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SGST AAAR

GST – Haryana AAAR - Input Tax Credit on Services for Qualified Institutional Placement – Appellant undertook a Qualified Institutional Placement (QIP) to raise capital and procured various services including lead management, legal, and consultancy services from investment bankers and other intermediaries - Appellant sought Advance Ruling on whether ITC is eligible under Section 16(1) of the CGST Act, 2017 on services for Qualified Institutional Placement – The impugned AAR denied the entire ITC on the ground that fund-raising through QIP does not constitute business or activity in the course or furtherance of business - Whether raising capital through QIP and the ancillary services thereto constitute business activities eligible for ITC purposes – HELD - The ITC eligibility must be examined separately for each component of fund deployment. For the portion of QIP proceeds utilized for repayment or pre-payment of borrowings undertaken by the company itself, such repayment represents discharge of financial liabilities undertaken in the course or furtherance of business, and efficient financial management is an integral component of commercial enterprise functioning, whereby activities for restructuring or repayment of borrowings directly contribute to stability and sustainability of business – The financial services rendered for raising capital bear nexus with business activities. Considering the broad definition of business under Section 2(17) of the CGST Act which includes any activity incidental or ancillary to trade or commerce, the services availed for raising funds utilized for repayment of the company's borrowings qualify as services used in the course or furtherance of business and thus ITC thereon is admissible under Section 16(1) - However, for the portion of QIP proceeds utilized for investment in the company's wholly owned subsidiary, the ITC is not admissible because although the subsidiary operates in the same line of business as the holding company, a holding company and its subsidiary are distinct legal entities and expenditure incurred by one entity cannot be claimed as ITC in the hands of another. The economic benefit of services procured for subsidiary investment accrues to the subsidiary and not to the holding company, and in the absence of direct and proximate nexus between input services and the business of the appellant holding company, ITC cannot be claimed despite consolidated financial statements reflecting subsidiary profits - The appeal is allowed in part, modifying the original ruling to permit ITC on services attributable to the portion of QIP proceeds utilized for repayment or pre-payment of borrowings of the company, while denying ITC on services attributable to the portion utilized for investment in the subsidiary – The appeal is partly allowed
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