GST credit on IPO expenses

Hi Arul,

Regarding GST Input Tax Credit (ITC) on IPO expenses, here’s the clarification:

Can GST ITC be claimed on IPO expenses?

• IPO expenses generally include fees paid to merchant bankers, legal fees, printing charges, registrar fees, etc.

• These expenses are typically capital in nature and relate to the raising of capital.

• GST on capital raising expenses (including IPO expenses) is considered blocked credit as per Section 17(5) of the CGST Act, which lists “goods or services received by a taxable person for construction of an immovable property, other than plant and machinery” and other capital goods or capital services where credit is restricted.

• IPO expenses are not related to business output supplies but are more of a capital expense or financial service.

• Therefore, ITC on GST paid on IPO expenses is generally not allowed.

If allowed, when can it be claimed?

• Even if some portion of GST on IPO expenses is allowed (like for certain services directly linked to business operations), ITC is available only when the invoice is received and the tax is paid to the government.

• ITC should be claimed in the year the invoice is received and the tax liability arises, subject to the normal ITC claiming rules (i.e., within 180 days of invoice date).

Summary: