A Banking Company/ Financial Institution engaged in supplying services by way of accepting deposits, extending loans or advances has the following options:
Option 1: Comply with the provisions of Section 17(2) regarding restriction of
credits relatable to exempt supplies in the manner prescribed; or
Option 2: Avail 50% of the eligible input tax credit every month on inputs, capital goods and input services.
A Banking Company/ Financial Institution choosing Option 2 has to follow the following procedure in accordance with Rule 38 of the CGST Rules, 2017:
The credit of tax paid on inputs and input services used for non-business
purposes and those that are not eligible in terms of Section 17(5) should not be availed
The credit of tax paid on supplies by another person having the same PAN can be availed in full
50% of the remaining credit will be admissible and should be claimed in Form GSTR-2
The eligible credit (as mentioned above) will be credited to the Electronic Credit Ledger
(ICAI FAQ PUBLICATION 06-09-2017 -: Input Tax Credit: FAQ NO. 44)