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CS Executive · Tax Laws and Practice · Input Tax Credit and Computation of GST Liability

Which of the following statements about the option available to banking companies and NBFCs under section 17(4) of the CGST Act, 2017 is correct?

A bank or NBFC engaged in accepting deposits or extending loans may avail 50% of eligible ITC each month with the rest lapsing. Once chosen, the option cannot be withdrawn during the remaining financial year, and the restriction excludes same-PAN supplies.

  1. AThey may avail 50% of the eligible ITC each month and the rest lapses, and the option once exercised cannot be withdrawn during the remaining part of the financial yearCorrect
  2. BThey may avail 50% of eligible ITC each month, with the lapsed part carried forward to the next month, and may withdraw the option at any time
  3. CThey may avail 50% of eligible ITC only on capital goods, not on inputs or input services
  4. DThey may avail 50% of eligible ITC, and the restriction applies even to supplies between registered persons having the same PAN

Explanation

Section 17(4) lets such entities choose between section 17(2) apportionment and availing 50% of eligible ITC on inputs, capital goods and input services each month, the rest lapsing. The option cannot be withdrawn for the rest of the financial year, and the 50% restriction does not apply to tax on supplies between registered persons with the same PAN. The other options contradict these points.

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