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

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

CGST Rule 38: Claim of Credit by a Banking Company or a Financial Institution (Chapter V: Input Tax Credit) [*1]

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

(d) [*4]

Notes (History of Amendments in Bare Text):

1. CGST Rule 38 introduced vide Notification 10/2017, effective 01/07/2017.

2. In clause (a)(ii), the text “, in FORM GSTR 2” omitted from 01/10/2022 vide Notification 19/2022.

3. In clause (c), the text “and shall be furnished in FORM GSTR 2” substituted with text “and the balance amount of input tax credit shall be reversed in FORM GSTR-3B” from 01/10/2022 vide Notification 19/2022.

4. Clause (d) omitted from 01/10/2022 vide Notification 19/2022. Please refer Notification 10/2017 for text thereof before omission.