Apportionment of Input tax Credit (Section 17 of CGST Act) - GST Ready Reckoner - GST

Apportionment of credit and block credit Restriction in claiming Input Tax Credit [ Section 17 of CGST Act ] (a) Where goods or services are used partly for the purpose of business and partly for other purposes [Section 17(1) of CGST Act] 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. As per section 17(6) of CGST Act, The Government may prescribe the manner in which the credit referred to in sections 17(1) of CGST Act may be attributed. (b) Where the goods or services are used for partly for taxable and partly for exempt supplies [Section 17(2) of CGST Act] 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 IGST 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. (c) Defining the value of Exempt supply for the purpose of section 17(2) of CGST Act [ section 17(3) of CGST Act ] Value of exempt supply means and includes - such supply of goods or services or both which attract nil rate of tax . such supply of goods or services or both which may be wholly exempt from tax , Non taxable supply , Supplies on which the recipient is liable to pay tax on reverse charge basis , Transaction in securities ( value of security for GST shall be taken as 1% of sale value of such security) , sale of land, ( value of sale of land for GST shall be taken as the same as adopted for the purpose of paying stamp duty) , sale of Building subject of clause (b) of para 5 of Schedule II , where the value of land shall be taken as the same as adopted for the purpose of paying stamp duty. (d) Value of exempt supply for the purpose of section 17(3) of CGST Act does not include the value of activities or transaction specified in Schedule III, except those Specified in paragraph 5 of the said Schedule III [i.e. sale of land and subject to clause (b) pf paragraph 5 of Schedule II, sale of building]. The value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the Schedule III ( w.e.f. 01.10.2023) . (e) Manner of Input tax credit for Banking company or a Financial institution or Non-banking financial company [ Section 17(4) of CGST Act Read With Rule 38 of CGST Rules] 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) of CGST Act regarding proportionate availment, 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: The restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number. (f) Block Credit A registered person shall be entitled to take credit of input tax charged to him on any supply of goods or services or both, which are to used or intend to used in the course or furtherance of business. but some specified services or goods or both restricted to take ITC with specified condition known as block credit . [ Section 17(5) of CGST Act] (g) As per section 17(6) of CGST Act , The Government may prescribe the manner in which the credit referred to in sections 17(1) and (2) of CGST Act may be attributed. Manner of determination of ITC in respect of inputs and inputs services and reversal thereof under sections 17(1) and (2) of CGST Act - Rule 42 of CGST Rules . Manner of determination of ITC in respect of capital goods and reversal thereof under section 17(1) and (2) of CGST Act - Rules 43 of the CGST Rules w.e.f. 01.04.2020. Important Notification clarification Whether electronic commerce operator, required to pay tax under section 9(5) of CGST Act , is liable to reverse proportionate input tax credit on his inputs and input services to the extent of supplies made under section 9(5) of the CGST Act . [ Circular No. 240/34/2024-GST Dated 31.12.204 ] it is clarified that Electronic Commerce Operator, who is liable to pay tax under section 9(5) of the CGST Act in respect of specified services, is not required to reverse the input tax credit on his inputs and input services proportionately under section 17(1) or (2) of CGST Act to the extent of supplies made under section 9(5) of the CGST Act .