The Telangana Authority for Advance Ruling has held that Input Tax Credit on expenses incurred in connection with a Fresh Issue of shares in an Initial Public Offering is eligible under Section 16 of the CGST Act, where the net proceeds are utilised for furtherance of the company’s business — and that ‘furtherance of business’ is a broader concept than the core business activity, encompassing activities that support, facilitate, promote or advance the business. However, ITC on expenses attributable to the ‘Offer for Sale’ portion by existing shareholders, the proceeds of which do not accrue to the company, is not eligible. The ruling by Members Vivekananda Reddy and K. Geeta in TSAAR Order No. 10/2026 (M/s Sai Silks Kalamandir Limited, decided 18.09.2026) relied on the CESTAT Bengaluru’s decision in Kernex Microsystems and the Supreme Court’s interpretation of Section 16(1) in Safari Retreats.
The applicant’s combined IPO comprised a Fresh Issue of 2,70,27,027 equity shares (Rs. 600 crores) for funding 30 new stores, two warehouses, working capital and debt repayment, and an OFS of 2,70,72,000 equity shares (Rs. 600.998 crores) by promoter and promoter group selling shareholders. The Fresh Issue expenses were estimated at Rs. 33.763 crores. The AAR held that IPO services facilitate the company’s access to capital which in turn facilitates business activities, establishing an indirect but substantial nexus with furtherance of business. Section 17(5) does not include IPO expenses among the blocked categories. The distinction between ‘in the course of’ and ‘in furtherance of’ business was articulated: the former covers activities forming part of normal conduct of business, the latter covers supporting, facilitating or advancing activities even if they do not form part of the principal business activity.
- 2026-juristway.com-2711-AAR(Telangana)-GST | AAR Telangana | TSAAR Order No. 10/2026 | 18.09.2026
