Rule 38: ITC option for banks and financial institutions

Who it applies to

Banking companies and financial institutions, including NBFCs, that make both taxable and exempt supplies (for example, interest income is exempt).

The choice

They can either:

1. Follow the normal Rule 42/43 proportionate reversal, or
2. Opt under section 17(4) to avail 50% of the eligible ITC on inputs, input services and capital goods every month. The other 50% lapses.

Points

• Blocked credits under section 17(5) are removed first.
• ITC on supplies received from another GSTIN of the same PAN is allowed in full under this option.
• The option chosen can't be changed during the financial year.
• Reversal is reported in GSTR-3B Table 4B(1).

Sources

• Central Goods and Services Tax Rules, 2017