1. Where Goods or Services are used Partly for Business Purposes and Partly for Other Purposes [Section 17(1) of CGST Act, 2017]
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.
Mr. Dust owning a bakery provides the following information for the month of November, 2017:
- Total ITC in respect of milk products received Rs. 80,000
- Milk products sold in the course of business 70%
- Milk products used in the birthday party of his daughter 30%
In the above-case, Mr. Dust shall be entitled to take ITC of Rs. 56,000 (Rs. 80,000 × 70%) in terms of provisions of section 17(1)
2. Where Goods and Services are used Partly for effecting Taxable Supply including Zero Rates Supply and Partly for Exempted Supplies [Section 17(2) of CGST Act, 2017 ]
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.
The value of exempt supply under section 17(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. [Section 17(3)]
Mr. Dust, a registered person provides the following information for the month of November 2018:
|(A)||Eligible Input Tax Credit in respect of services||Rs. 1,50,000|
|(B)||Taxable Supplies [excluding Zero-rated Supplies]||Rs. 8,00,000|
|(C)||Exports [Zero-Rated Supplies]||Rs. 4,00,000|
|(D)||Exempt Supplies||Rs. 3,00,000|
|(E)||Supplies on which recipient is liable to pay tax on reverse charge basis||Rs. 1,00,000|
|(F)||Total supplies [B+C+D+E]||Rs. 16,00,000|
|(G)||Percentage of Taxable Supplies including Zero Rated Supplies to the Total Supplies||75% [12,00,000/16,00,000×100]|
In the above-case, Mr. Dust shall be entitled to take Input Tax Credit of Rs. 1,12,500 [75% of Rs. 1,50,000]
3. Optional method for Bank, etc. for taking Input Tax Credit [Section 17(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 section 17(2) (see above), or
— avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse.
The option once exercised shall not be withdrawn during the remaining part of the financial year.
Further, 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.
State Bank of India provides the following information for the month of November 2017 for their Registration in Punjab:
|ITC from suppliers of goods or services or both||1,00,000|
|ITC from other offices||20,000|
Eligible credit for the month of November — 50% of Rs. 1,00,000 i.e. Rs. 50,000 + Rs. 20,000 (ITC from other offices for which restriction of 50% is not applicable) = Rs. 70,000