Section 17 of the Central Goods and Services Tax Act, 2017 is provides about ‘Apportionment of credit and blocked credits’.

There are two situation where we need to apportion credit in respect of eligible and ineligible part:
(1) The goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes

(2) The goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies.

Sub section (4) provides about two option in respect for Banking company or a Financial institution including a non-banking financial company for claiming credit as per normal rule or claim credit on 50% irrespective of sub section (2) of section 17 which talk about apportionment of credit for taxable and exempt supplies.

17. Apportionment of credit and blocked credits

(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. (Credit Taken as a Pro-rata basis of supplies used in business purpose )

Illustration: Y Ltd purchase on which input Credit of Rs. 1,00,000 out of the total input 70 % input used in Business purpose.

= Input Tax credit = 1,00,000 x 70% (only use in business or furtherance in business)

Input Tax Credit = 70,000

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act, and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (Credit Taken as a Pro-rata basis supplies use in Taxable and Zero rated supplies)

Illustration: X Ltd purchase on which input Credit of Rs. 1,00,000 out of the total input 60 % input used in Business purpose in taxable as well as Zero rated supplies.
 Input Tax credit = 1,00,000 x 60% ( only use in business or furtherance in business in taxable as well as Zero rated supplies.)
Input Tax Credit = 60,000

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

(4) A Banking company or a Financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse.

Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year.

Provided further that the restriction of 50% shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.

 This is shown in GSTR -2 by Bank or NBFC avail full extent of credit on inter-branch supply of services of the banking or NBFC company and also avail 50% of ‘all other’ input tax credits. ‘All other’ credits refer to input tax credit that would have been available u/s 16 before administering the restriction in this section but not avail any credit relates to u/s 17(5) and sub section 2 of section 17.

As Per Rule 3: Claim of credit by a banking company or a financial institution

A banking company or a financial institution, including a non-banking financial company, engaged in supply of services by way of accepting deposits or extending loans or advances that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance with the option permitted under sub-section (4) of that section, shall follow the procedure specified below –

(a) The said company or institution shall not avail the credit of,-
(i) Tax paid on inputs and input services that are used for non-business purposes, and

(ii)The credit attributable to supplies specified in sub-section (5) of section 17, in FORM GSTR-2;

(b)The said company or institution shall avail the credit of tax paid on inputs and input services referred to in the second proviso to sub-section (4) of section 17 and not covered under clause (a);

(c)50% of the remaining amount of input tax shall be the ITC admissible to the company or the institution and shall be furnished in FORM GSTR 2

(d)The amount referred to in clauses (b) and (c) shall, subject to the provisions of Sections 41, 42 and 43, be credited to the electronic credit ledger of the said company or the institution.

Part-1

http://etaxupdates.com/part-1-input-tax-credit-under-gst/

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15 COMMENTS

  1. Dear Sir, what we can do if fees amount wrongly deposit into panelty ? How can we transfer the same amount from penalty to fees ?

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