Do these 3 things before closing this tab:
1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesPotentially, yes. A GST-registered company can generally argue for input tax credit (ITC) on services used or intended to be used for its own fresh issue of shares, provided the normal statutory conditions are satisfied and no blocked-credit rule applies. The Institute of Chartered Accountants of India (ICAI) gives this view for expenses such as legal work, registrar services, underwriting, banking and publicity.
The answer changes when an initial public offering combines a fresh issue with an offer for sale (OFS) by existing shareholders. Costs attributable to shareholders selling their own shares are not automatically the company’s business expenses. The company should separate fresh-issue, OFS and common costs, claim only the supported portion, and retain evidence for its allocation.
As an Amazon Associate I earn from qualifying purchases.
The short legal answer
Section 16(1) of the Central Goods and Services Tax framework allows ITC for goods or services used, or intended to be used, in the course or furtherance of business. IPO professional services can fit that test when the company is raising new capital for its business. The ICAI’s Practical FAQs under GST, question 259, states: “Yes. ITC is admissible in the case of IPO expenses.” Its reasoning is that IPO services are used or intended for business and are not specifically listed as blocked credits under section 17(5).
The Tool Desk
Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →That statement is professional guidance, not a blanket statutory clearance. Eligibility still depends on the particular invoice, recipient, service, tax period, receipt of service, documentation and the other conditions in force when the credit is taken. A company should not treat every cost appearing in an IPO budget as eligible merely because it is labelled an IPO expense.
#1 Best Overall
Why the fresh issue and OFS distinction matters
Fresh issue
In a fresh issue, the company issues new shares and receives the subscription proceeds. The capital can fund working capital, expansion, repayment, acquisitions or another corporate purpose. Services that directly support that capital raising have a strong business-nexus argument: the company is the recipient and beneficiary of the fundraising activity.
Offer for sale
In an OFS, existing shareholders sell shares that they already own. The sale proceeds go to those shareholders, not to the issuing company. An expense incurred solely to enable that shareholder exit is therefore difficult to characterize as the company’s own business expenditure.
Combined offerings
Many public offerings include both components. A single engagement with a merchant banker, registrar or advertising agency may cover the entire transaction. The company should identify which services benefit the fresh issue, which benefit the OFS and which genuinely serve both. The fact that the supplier issued one invoice does not make the entire GST amount eligible in the company’s hands.
A 2026 report by TaxGuru describing a Telangana Authority for Advance Ruling (AAR) decision says the company was denied ITC to the extent costs related to the existing shareholders’ OFS, while fresh-issue costs were connected with the company’s business. The report also refers to apportionment of common costs. The primary order and its appellate status were not established in the available material, so the report should be treated as an indication of the distinction, not as a nationwide binding precedent.
Rank #2
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
Which IPO expenses are commonly considered?
The following categories appear in the ICAI FAQ and in the reported Telangana AAR discussion. None is an automatic approval; test each invoice against the beneficiary, issue component, business purpose and statutory conditions.
| Expense category | Typical service | When the company may have an ITC argument | Key qualification |
|---|---|---|---|
| Legal charges and legal consultancy | Drafting, due diligence, regulatory and transaction advice | The engagement supports the company’s fresh issue or its continuing business | Separate work done for selling shareholders should not be included without a supported basis |
| Merchant banker fees | Issue management, due diligence and coordination | The fee relates to raising new capital for the company | For a mixed issue, obtain a defensible fresh-issue/OFS split |
| Registrar fees | Applications, allotment, records and issue administration | The service is supplied to and used by the issuer for its fresh issue | Review the engagement and invoice where the registrar handles both components |
| Underwriting commission | Underwriting or subscription support | The underwriting protects or facilitates the company’s capital raising | Do not assume the same treatment for an OFS undertaken for shareholder liquidity |
| Bank charges | Collection, escrow and issue-related banking services | The charge is for the company’s issue activity and is invoiced to it | Confirm the actual recipient and service description |
| Publicity and advertising | Investor communication and issue publicity | The campaign promotes the company’s fresh issue | Allocate campaigns that promote both a fresh issue and an OFS |
| Listing fees | Admission or listing-related services | The fee is demonstrably part of the company’s business capital-raising and listing process | Check the invoice, recipient and the applicable tax treatment for the period |
Conditions to check before taking the credit
- Confirm the claimant and period. The claimant should be the GST-registered company that received the service. Identify the relevant registration, state or Union territory, financial year and return period. Rules, time limits and reporting requirements can change, so apply the law in force for that period.
- Classify the offering. Obtain the offer documents, board approvals and issue structure. Mark every cost as fresh issue, OFS or common. Do not rely only on the general label “IPO expenses.”
- Verify the tax invoice. Check the supplier’s GST details, the company’s legal name and GSTIN where required, invoice number and date, taxable value, GST amount, description of service and place-of-supply details. Correct an invoice that names a selling shareholder when the company is asserting that it received the service.
- Show that the service was received. Preserve the engagement letter, scope of work, deliverables, correspondence, approvals, payment record and evidence of completion. A cost estimate or a journal entry alone does not establish receipt.
- Establish business use. Link the service to the company’s capital raising and business plan. Board papers, issue schedules, legal opinions, merchant-banker mandates and vendor deliverables can help demonstrate that connection.
- Test for blocked or otherwise restricted credit. Review section 17(5), the documentation rules and any restriction applicable to the service, recipient or period. The ICAI FAQ identifies no specific section 17(5) block for the IPO expenses it discusses, but that does not override a restriction that applies on the actual facts.
- Check return and supplier-reporting requirements. Reconcile the invoice and tax amount with the supplier-reported information and the return-related conditions applicable to the period. Follow the prescribed-document and matching requirements in force when the credit is claimed.
- Record the claim and working papers. Keep a schedule showing invoice value, GST, issue component, allocation percentage, eligible amount, return period and reviewer approval. This prevents a later claim from exceeding the documented business portion.
How to apportion common IPO costs
There is no universal percentage that can be applied to every mixed offering. The allocation should reflect the service actually supplied and the party that benefits. Start with the supplier’s engagement letter and fee proposal: some advisers quote separate amounts for the fresh issue and OFS, while others describe one integrated mandate.
For a combined mandate, use contemporaneous evidence such as the offer documents, number and value of shares in each component, workstreams listed in the engagement, time records, separate deliverables and the negotiated fee structure. A simple split by share count or offer value may be reasonable in a particular case, but it should be explained and supported rather than selected solely because it produces a larger credit. If the service is exclusively for the selling shareholders, allocate it entirely away from the company’s claim.
Free tools Windows power users keep installed
One-click scans. No signup required.
For example, suppose a registrar’s invoice covers application processing for both a fresh issue and an OFS. The company could document the registrar’s workstreams, identify the portion tied to allotment of newly issued shares and exclude the portion tied to the shareholders’ sale. If the invoice does not permit a precise division, obtain a written allocation from the supplier or prepare a contemporaneous internal method tied to the actual work. The reported Telangana AAR discussion supports separating common expenditure, but the detailed methodology and current legal status should be checked against the primary order before relying on it.
Evidence file: what to retain
- GST tax invoice and any debit or credit notes.
- Supplier registration details and proof that the supplier charged and reported the tax as required.
- Engagement letter, purchase order, scope, deliverables and correspondence.
- Offer document, issue timetable and board or committee approvals identifying the fresh issue and OFS components.
- Bank proof of payment and accounting entry.
- A cost-allocation schedule for every shared invoice, with the method, inputs and approval date.
- Reconciliation to the relevant GST return and supplier-reported data.
- Working papers showing why the service was used or intended for use in the company’s business.
- Advice or review documenting the treatment of unusual items, disputed invoices or changes in the issue structure.
What the main authorities and guidance establish
ICAI practical FAQ
The ICAI’s 2020 FAQ directly addresses whether ITC is admissible for IPO expenses and answers affirmatively. It lists legal charges, registrar fees, underwriting commission, bank charges and publicity expenses, relying on the business-use test and the absence of a specific section 17(5) prohibition for the described expenses. Because it is guidance from a professional body, it should be read with the current CGST Act, rules and later rulings.
CBIC framework
CBIC’s ITC rules provide the wider compliance framework: prescribed tax documents, receipt and return-related requirements and other conditions must be met. CBIC’s sectoral explanations also distinguish a taxable third-party service from securities themselves. Shares and other securities are excluded from the statutory definitions of goods and services, but a separately charged legal, banking, registrar or advisory service can still be a taxable service. The exclusion of securities does not, by itself, decide the credit treatment of a connected service.
Telangana AAR report
The TaxGuru report describes a Telangana AAR distinction between fresh-issue costs and OFS costs. An AAR generally turns on the applicant’s facts and has limited binding reach under the GST framework; it is not a rule for every company in India. Since the primary order and any appeal or stay were not verified, confirm the current status before treating the decision as decisive.
Crashes, No Sound, or Screen Glitches?
Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minutePC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11Older service-tax background
The ICAI FAQ also refers to an earlier CESTAT matter involving IPO-related services under the previous service-tax regime. That history may explain the professional guidance, but it is not a direct ruling under the CGST Act and cannot replace current GST analysis.
Rank #4
Illustrative fact patterns
Company-only fresh issue
A company hires counsel, a registrar and an underwriter solely for a fresh issue. The invoices name the company, the services are received, the tax documents and return conditions are satisfied, and the services support the company’s capital raising. The company has the strongest case for claiming the related GST, subject to the applicable restrictions and timing rules.
Fresh issue combined with OFS
A merchant bank issues one invoice for a transaction containing both components. The company should obtain the engagement scope and allocate the fee between the capital raised for the company and the sale by existing shareholders. Only the supported company portion should enter the ITC schedule; the OFS portion should be excluded.
OFS-only transaction
Existing shareholders sell their holdings and receive all proceeds, while the company provides no fresh capital. Costs incurred solely for that sale do not ordinarily have the company’s own business-fundraising nexus. The company should not claim them merely because it appears in the offer documents or paid the supplier initially.
What’s actually slowing this PC down?
Pick the symptom - the matching free tool is one click away.
Common mistakes and how to correct them
Claiming the entire GST on a bundled invoice
Problem: The accounting team books every IPO invoice to the company and claims all GST. Correction: map the invoice to the issue component and remove the shareholder-benefit portion before filing.
Best Value
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
Using the invoice name as the only test
Problem: An invoice addressed to the company is treated as conclusive proof of eligibility. Correction: also establish who benefited, what work was performed and why it furthered the company’s business.
Assuming an AAR binds all taxpayers
Problem: A reported ruling is cited as a nationwide entitlement. Correction: identify the applicant, facts, jurisdiction, appeal status and the exact proposition before relying on it.
Confusing eligible credit with cash recovery
Problem: The company expects an immediate refund simply because ITC is eligible. Correction: first determine whether the credit can be used against output tax under the applicable rules. Refund eligibility, export or inverted-duty conditions, time limits and documentation are separate questions.
Ignoring changes after the initial allocation
Problem: The issue structure, fee or share split changes after the original ITC working. Correction: update the allocation, preserve the revised approvals and adjust the claim in the return process applicable to the period.
ITC eligibility is not the same as utilization or refund
Even when an IPO service satisfies the business-use test, the resulting credit first sits within the GST credit mechanism. Whether it can be set off immediately depends on the company’s output-tax position, ledger rules, timing and other statutory requirements. A separate refund analysis is needed if the company expects cash recovery. No conclusion about eligibility alone promises a refund, and an unused balance should not be described as cash returned automatically.
A practical decision test
Before approving an IPO-related ITC entry, ask five questions in order:
- Who received and benefited from the service: the issuer, selling shareholders or both?
- Was the service connected to a fresh issue, an OFS or a documented common activity?
- Does the invoice and supporting file establish receipt, tax payment and the other conditions for the relevant period?
- Is any part blocked or otherwise restricted by the current law?
- Can an independent reviewer reproduce the allocation from the offer documents, engagement and accounting records?
If the answer to the first two questions is unclear, pause the claim rather than treating the invoice description as sufficient. If the answer to the evidence or allocation questions is no, correct the documentation before filing or obtain fact-specific tax advice.
Recommended Free Tools
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
