No ITC on Share Buyback Expenses: Gujarat AAAR Upholds GAAR Ruling
The appellant, M/s. Gujarat Narmada Valley Fertilizers & Chemicals Ltd. is a public limited company and manufactures fertilisers and chemicals. In December 2023, the company started a share buyback programme as per the Government of Gujarat’s resolution dated 24.04.2023.
The appellant claimed that the expenses incurred for the share buyback are eligible for the ITC benefit. To clear this up, they filed an application before the Gujarat Authority for Advance Ruling (GAAR) seeking an advance ruling on the following question:
“Whether the expenditure incurred by the applicant, a listed entity, for the buyback of its shares in the course of furtherance of business, is eligible for ITC under the GST regime?”
The Gujarat AAR replied that the applicant cannot avail ITC on the expenses covered for the buyback of its shares, as it does not meet the condition of being either goods or services. The GAAR said that the securities are not covered in the definition of goods and services. Since the appellant was not satisfied with this ruling, it further approached the Gujarat Appellate Authority for Advance Ruling (GAAAR).
The GAAAR observed that the shares are securitities not goods or services. Section 17(2) does not allow the ITC of goods and services to the extent of expenses attributable to taxable supplies. It noted that buyback is not a taxable supply under GST. It said that the tax paid towards goods and services used for the transaction in securities, which is not supply, is ineligible for the input tax credit (ITC).
It further noted that as per Section 17(3), transactions in securities are considered as exempt supplies. So, the companies must reverse proportionate ITC for both taxable and exempt activities.
The appellant also cited other rulings (Punjab State Industrial Development Corporation Ltd., Brooke Bond India Ltd., and Kernex Microsystems). However, GAAAR observed that these decisions were not relevant because those cases did not deal with a statutory exclusion of such activities from the ambit of input tax credit.
Therefore, the GAAAR upholding the decision of GAAR, rejected the appeal filed by the appellant and held that the company cannot claim ITC on expenses incurred for the buyback of its own shares and must reverse ITC proportionately on the expenses.
Case Citation: M/s. Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GAAAR); Advance Ruling/SGST&CGST/2025/AR/03; 22/09/2025
