Recommended Free Tools
Short answer: GST paid on IPO-related services can be available as input tax credit (ITC) to a registered Indian company when the service is received by that company and is used, or intended to be used, in the course or furtherance of its business. Legal, registrar, underwriting, banking, publicity and similar professional services are not automatically creditable merely because they appear in the IPO budget; the Section 16 conditions, documentary rules and Section 17 attribution limits still apply.
The strongest claim usually relates to a fresh issue, where the issuer receives the money and deploys it for business purposes. Costs connected with an offer for sale (OFS), in which existing shareholders receive the proceeds, generally should not be claimed by the issuer to the extent the services benefit those sellers. A reported 2026 Telangana Authority for Advance Rulings (AAR) decision illustrates that distinction, while a 2026 Haryana Appellate AAR (AAAR) alert shows that the treatment remains fact-sensitive and developing.
As an Amazon Associate I earn from qualifying purchases.
The GST starting point: business use, not the label “IPO expense”
Section 16(1) of the Central Goods and Services Tax (CGST) Act gives a registered person the basic entitlement to credit input tax on supplies used or intended for use in the course or furtherance of business, subject to the statutory conditions and restrictions. The CBIC’s current Act page states that rule in full: "Every registered person shall, subject to such conditions and restrictions as may be prescribed … be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business." Read the live text at CBIC CGST Act, Section 16.
For an IPO, that means the analysis follows the actual service, recipient and purpose. An invoice paid during the listing process does not become eligible simply because the company calls it an issue cost. Conversely, an expense can qualify even though it is capital-raising related if the service is genuinely for the issuer’s business and all Section 16 requirements are met.
#1 Best Overall
At a minimum, the claimant should be the registered person to whom the taxable supply was made, hold the prescribed tax document, receive the service and satisfy the other Section 16 conditions applicable for the filing period. Rule 36 sets out the documentary basis for an ITC claim; consult the current text at CBIC CGST Rules, Rule 36.
Which IPO costs are potentially creditable?
The Institute of Chartered Accountants of India (ICAI) Practical FAQs under GST, Question 259, answers the literal question—whether ITC is admissible on IPO expenses—with “Yes,” then explains that the normal business-use test applies. It identifies legal charges, registrar fees, underwriting commission, bank charges and publicity expenses as examples of potentially eligible business inputs. The FAQ is practical guidance published in 2020, so it must be read with later amendments and rulings. See ICAI Practical FAQs under GST, Question 259.
| Expense or service | When an issuer may have a claim | Key qualification |
|---|---|---|
| Merchant banker or book-running lead manager | Services directly connected with the issuer’s fresh issue and business-purpose funding. | Confirm the contracting recipient and separate any work performed for selling shareholders or an OFS. |
| Legal and professional fees | Advice and transaction work that facilitates the issuer’s own capital raising and business plans. | Seller-specific legal advice should not be treated as the issuer’s business input. |
| Registrar services | Registrar work for the issuer’s offering, to the extent linked to the issuer’s business component. | Use the invoice description and engagement terms to identify the beneficiary. |
| Underwriting commission | Underwriting arranged for the issuer’s fresh issue. | Allocate a combined mandate when the underwriter also supports an OFS. |
| Bank and payment-related charges | Banking services supplied to the registered issuer for the issue and its business funding. | Check that the tax invoice names the claimant and describes a taxable service. |
| Publicity, advertising and investor communication | Promotion of the issuer’s offering where the service supports its business capital raising. | Do not include campaigns undertaken solely for a shareholder’s sale. |
| Stock-exchange, filing, audit, printing and other shared costs | Potentially, after examining the actual service and allocating fresh-issue and OFS portions. | No universal IPO-specific allocation percentage is established; retain a reasoned workpaper. |
“Potentially eligible” is deliberate. Each invoice still requires its own Section 16 and Section 17 review. An expense can fail because the company was not the recipient, the document is deficient, the service was not received, or the amount must be apportioned.
Rank #2
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
Fresh issue and OFS must be separated
Fresh issue: proceeds go to the issuer
In a fresh issue, the company creates and issues shares and receives the subscription money. When the funds are intended for activities such as expansion, debt repayment connected with the business, working capital or other corporate purposes, the connection between the capital-raising service and the issuer’s business is comparatively strong. That is the fact pattern in which merchant-banker, legal, registrar, underwriting, bank and publicity services are most likely to satisfy the business-use limb, subject to the remaining conditions and any Section 17 adjustment.
OFS: proceeds go to existing shareholders
In an OFS, existing shareholders sell their shares and receive the sale consideration. Services incurred for those sellers’ disposal are difficult to characterize as inputs used in the issuer’s business. The reported 2026 Telangana AAR summary states that credit was available for the fresh-issue component where proceeds supported business purposes, but expenses attributable to shareholders’ OFS were not incurred for the company’s business. That is a fact-specific ruling, not a nationwide automatic rule. Review the summary at TaxTMI’s reported Telangana AAR case, and verify the underlying order, applicant and procedural status before relying on it.
The issuer should not claim a seller’s expense merely because the issuer paid the supplier or coordinated the transaction. The contract, invoice, scope of work and economic beneficiary matter. Where a shareholder is the true beneficiary, the cost should generally be borne by or allocated to that seller rather than included in the issuer’s ITC schedule.
Combined fresh issue and OFS
Many offers combine both components. Treating the entire IPO invoice as one issuer business expense creates avoidable risk. Identify work that is exclusively for the fresh issue, work exclusively for the OFS and work that serves both. Directly attributable amounts can be assigned to the relevant component; shared services require a reasonable method supported by contemporaneous records.
Do these 3 things before closing this tab:
1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsHow to analyze and document an ITC claim
- Confirm the claimant and registration. Verify that the company claiming credit is a registered person for the relevant period and is the recipient named on the tax invoice. A newly incorporated or pre-operation company may have separate registration and timing questions; Section 16’s general rule does not answer every fact pattern.
- Map the offer structure. Obtain the offer documents and transaction schedule showing the fresh-issue quantity, OFS quantity and destination of proceeds. Record which shareholders sell in the OFS and which funds enter the issuer’s bank account.
- Build an invoice-level register. For every supplier, capture the GSTIN, invoice number and date, taxable value, tax amount, service description, contract, recipient, payment status and the project work to which it relates. Link each line to fresh issue, OFS or common work.
- Check the service and recipient. Ask who commissioned the work, who is legally liable to pay, who benefits and whether the invoice describes a taxable supply to the issuer. An issuer-paid invoice can still represent a shareholder service if the contractual arrangement shows that the seller is the beneficiary.
- Allocate common services. Use a method that reflects the work performed—for example, separate statements of work, deliverables, transaction volumes or another documented cost driver. The general ITC rules support attribution for mixed use, but the available authorities do not prescribe one mandatory IPO allocation formula. Keep the calculation, assumptions and approvals with the tax records.
- Apply Section 17 restrictions. Test whether any amount is blocked or relates to exempt supplies, non-business use or both. Section 17’s apportionment provisions can reduce a credit that passes the initial Section 16 business-purpose test.
- Reconcile before filing. Match the purchase register to supplier data and the return for the period in which credit is taken, and retain evidence of receipt and payment required by the Act and Rules. Correctly reverse or defer amounts that cannot yet be substantiated.
- Revisit the position when facts change. If the issue size, OFS allocation, service scope or use of proceeds changes, update the allocation and supporting workpaper rather than carrying forward the original assumption.
Section 17: the additional filter many claims miss
Section 16 is only the entry point. Section 17 limits credit attributable to exempt supplies and provides apportionment rules where inputs are used for more than one purpose. The current CBIC text of Section 17(3) says the value of exempt supply includes, among other items, “transactions in securities.” Read the provision at CBIC CGST Act, Section 17.
That wording matters because an IPO may contain a share transaction, yet it does not by itself answer how every issue expense must be treated. The relationship between capital-raising services, the fresh issue, an OFS and the Section 17(2)-(3) calculation is fact-dependent. The general attribution framework is set out in the CBIC Input Tax Credit Rules, including the familiar Rules 42 and 43 methods for common inputs and input services. Those rules do not create a single IPO formula.
Rank #4
A June 2026 EY India alert on a Haryana AAAR reports that ITC was allowed for services used to raise capital based on the end-use of funds, but expressly notes that the ruling did not resolve the interaction with Sections 17(2) and 17(3). Consequently, an issuer should not describe the securities reference as either irrelevant or conclusively fatal without analyzing its own structure and filing period. See EY India’s June 2026 Haryana AAAR alert.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common failure points and how to avoid them
- Claiming every line in the IPO budget: Separate business-use services from shareholder-specific OFS work.
- Relying on payment by the issuer: Payment does not establish that the issuer was the recipient or beneficiary.
- Using a single unsupported percentage: A round-number split between fresh issue and OFS is weak unless tied to contracts, deliverables or another rational cost driver.
- Ignoring Section 17: Passing the business-purpose test does not eliminate exempt-supply or mixed-use attribution.
- Keeping only the invoice: Retain engagement letters, board or transaction documents, allocation workings, proof of receipt and evidence showing how proceeds are intended to be used.
- Treating an AAR as universal precedent: Authority for Advance Ruling decisions generally turn on the applicant’s facts and jurisdiction. Recent summaries may also be appealed or clarified.
- Assuming the 2020 FAQ settles later law: ICAI’s answer is useful practical guidance, but amendments and later rulings must be checked for the period of claim.
Worked examples
Example 1: entirely fresh issue
A registered company engages a merchant banker, registrar, lawyers and an underwriter for a fresh issue. The invoices name the company, the services are received, and the proposed proceeds fund a new manufacturing facility. Subject to the normal Section 16 documentation and Section 17 review, these costs present the strongest case for issuer ITC.
Free tools Windows power users keep installed
One-click scans. No signup required.
Example 2: entirely OFS
Founders sell their shares through an OFS and receive the proceeds. The company pays a supplier for preparing seller disclosures under a contractual arrangement benefiting the founders. The economic purpose is the shareholders’ sale, so the company should not treat that tax as its own business input merely because it settled the invoice.
Best Value
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
Example 3: one mandate covers both components
A lead manager’s engagement covers a combined fresh issue and OFS, with one GST invoice. The company should obtain the scope and deliverables, identify any separately priced work, and allocate the balance using a documented method that reflects the service. Only the issuer’s supportable fresh-issue/business portion should enter the ITC claim, with any Section 17 adjustment applied afterward.
A practical decision checklist
- Is the claimant GST-registered and named as recipient?
- Was the service actually received and supported by a compliant tax document?
- Does the service further the issuer’s business, or does it benefit an OFS seller?
- Who receives the related proceeds?
- Is the invoice exclusively fresh issue, exclusively OFS or shared?
- Is the allocation reproducible from contracts and workpapers?
- Could Section 17(2)-(3), including the reference to transactions in securities, require attribution or reversal?
- Have current amendments, the primary ruling text and the filing-period rules been checked?
In short, IPO-related GST is not categorically creditable or blocked. The defensible approach is an invoice-by-invoice claim tied to the issuer’s business, with fresh-issue and OFS costs separated, common services allocated on evidence, and Section 17 restrictions tested before the credit is reported.
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.
