ITC on Professional and Legal Expenses for Share Buyback are Disallowed | AAAR

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  • Last Updated on 6 November, 2025

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Share Buyback

Case Details: Gujarat Narmada Valley Fertilizers & Chemicals Ltd., In re [2025] 179 taxmann.com 539 (AAAR-GUJARAT)

Judiciary and Counsel Details

  • Rajeev Topno & Sunil Kumar Mall, Member
  • Rutvij Modi & Jenee Bhavsar, CAs for the Appellant.

Facts of the Case

The appellant, a public sector company engaged in the manufacture of fertilisers and chemicals, undertook a buyback of its own shares pursuant to a State Government resolution and incurred professional, legal, consultancy, and incidental expenses for the transaction. It sought input tax credit (ITC) on the GST paid for such expenses, contending that these were incurred in the course or furtherance of business. The claim was rejected, holding that since the buyback involved shares, which are securities excluded from the ambit of goods and services. ITC was not admissible. The appellant filed an appeal before the Appellate Authority for Advance Ruling (AAAR).

AAAR Held

The AAAR held that shares constitute securities and are neither goods nor services under GST law. Accordingly, expenses directly related to transactions in securities were treated as exempt, making ITC on such costs ineligible under Sections 16 and 17 of the CGST Act and the Gujarat GST Act. It was observed that ITC entitlement is limited to inputs used for taxable supplies and does not extend to all business-related activities, including those pertaining to securities transactions. It further noted that the ‘blocked credit’ provisions reinforced this restriction. Consequently, the AAAR concluded that ITC on professional, legal, and consultancy expenses incurred for share buyback was inadmissible.

List of Cases Reviewed

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied