Banks and NBFCs: CBIC clarifies the 50% input tax credit option
What changed. Section 17(4) of the CGST Act lets a banking company or financial institution, including an NBFC, that accepts deposits or extends loans and advances take 50% of eligible input tax credit (ITC) instead of a proportionate reversal. CBIC has clarified:
- A registration of such an entity that does not supply deposit, loan or advance services, for example one only in bullion trading, can neither opt for nor be required to follow section 17(4).
- If one registration that supplies these services opts for section 17(4), every other registration of the entity that supplies them must also follow it.
- The relief in the second proviso to section 17(4), for supplies between registrations with the same PAN, is available only where the supplying registration has also opted for section 17(4).
- GSTR-3B reporting is set out in steps. Credit on non-business use and blocked credit is reversed in Table 4(B)(1). Same-PAN credit under the second proviso is availed in full. Fifty per cent of the rest is availed and the balance reversed in Table 4(B)(1). Credit not yet eligible under section 16 is reversed temporarily in Table 4(B)(2), or kept pending on the Invoice Management System (IMS).
- Officers are asked not to take an adverse view of a different past reporting method if the amount of ITC availed matches these principles.
Who it affects. Banking companies, financial institutions and NBFCs registered under GST.
From when. The circular is dated 26 October 2026.
What to do. - Check that every registration that supplies deposit or loan services follows the same option. - Align GSTR-3B reporting with the steps in the circular. - Review same-PAN cross-charges against the second proviso.
Official source: CBIC Circular No. 261/07/2026-GST dated 26 October 2026
This is general information based on the law as on the date shown, not professional advice. Rules change often; check the current position before acting.