Rule 38 of CGST Rules 2017: Claim of ITC by Banks/ Financial Institutions

Provisions under Rule 38 of the Central Goods and Services Tax (CGST) Rules, 2017 relating to “Claim of Input Tax Credit (ITC) by a Banking Company or a Financial Institution”, are as under:

CGST Rule 38: Claim of Credit by a Banking Company or a Financial Institution (Chapter-V: Input Tax Credit)

A banking company or a financial institution, including a non-banking financial company, engaged in the 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 following procedure, namely,-

(a) the said company or institution shall not avail the credit of,-

(i) the tax paid on inputs and input services that are used for non-business purposes; and

(ii) the credit attributable to the supplies specified in sub-section (5) of section 17, in FORM GSTR 2; [Note 1(a)]

(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) fifty per cent of the remaining amount of input tax shall be the input tax credit admissible to the company or the institution and shall be furnished in FORM GSTR 2 and the balance amount of input tax credit shall be reversed in FORM GSTR-3B; [Note 1(b)]

(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. OMITTED [Note 1(d)]

Amendments History:

1. Amendments vide Central Tax Notification 19/2022 dated 28/09/2022, effective October 1, 2022:

(a) in clause (a)(ii), the text “in FORM GSTR-2” omitted;

(b) in clause (c), the text “and shall be furnished in FORM GSTR2” substituted with the text “and the balance amount of input tax credit shall be reversed in FORM GSTR-3B”;

(c) clause (d) omitted.

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Note: The CGST Rules 2017 along with the prescribed Forms were initially notified vide Central Tax Notifications 3/2017 dated 19/06/2017 (Rule 1 to 26), 10/2017 dated 28/06/2017 (Rules 27 to 138) and 15/2017 dated 01/07/2017 (Rules 139 to 162). These Rules/ Forms were subsequently amended by CBIC through various Notifications issued from time to time. Information on this page is a Rule-wise compilation of the Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.