Amended and updated notes on section 17 of CGST Act, 2017. Detail discussion on provisions and rules related to apportionment of credit and blocked credits.
Chapter V (Sections 16–21) of the Central Goods and Services Tax Act, 2017 deals with the provisions related to input tax credit. Section 17 of CGST 2017 provides for apportionment of credit and blocked credits.
Recently, we have discussed in detail section 16 (Eligibility and conditions for taking input tax credit) of CGST Act 2017. Today, we learn the provisions of section 17 of Central GST Act 2017.
Section 17 of the Central Goods and Services Tax Act, 2017 has been notified by the Ministry of Finance vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. This notification was come into force from 1st July, 2017 i.e. the commencement date of section 17 is 1-7-2017.
| Name of Act | The Central Goods and Services Tax Act 2017 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Central Board of Indirect Taxes & Customs |
| Governing body | GST Council |
| Number of Chapters | 21 |
| Number of Sections | 174 |
| You are reading: | |
| Chapter No. | V |
| Chapter Name | Input Tax Credit |
| Section No. | 17 |
| Section Name | Apportionment of credit and blocked credits |
| Updated 2024 Edition | GST Law Book PDF |
Relevant Rules and Forms for GST Section 17:
- Rule 38: Claim of credit by a banking company or a financial institution
- Rule 42: Manner of determination of input tax credit in respect of inputs or input services and reversal thereof
- Rule 43: Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases
Section 17 of Central GST – Apportionment of credit and blocked credits1
Section 17 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017.
Section 17(1) of CGST Act
Section 17(1): 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.
Section 17(2) of CGST Act
Section 17(2): 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.
Section 17(3) of CGST Act
Section 17(3): The value of exempt supply under sub-section (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.
Explanation: For the purposes of this sub-section, the expression “value of exempt supply” shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.
Section 17(4) of CGST Act
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 sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:
Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year:
Provided further that 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.
Section 17(5) of CGST Act
Section 17(5): Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: —
- (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely––
- (A) further supply of such motor vehicles; or
- (B) transportation of passengers; or
- (C) imparting training on driving such motor vehicles;
- (aa) vessels and aircraft except when they are used––
- (i) for making the following taxable supplies, namely:—
- (A) further supply of such vessels or aircraft; or
- (B) transportation of passengers; or
- (C) imparting training on navigating such vessels; or
- (D) imparting training on flying such aircraft;
- (ii) for transportation of goods;
- (i) for making the following taxable supplies, namely:—
- (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such services shall be available—- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;
- (ii) where received by a taxable person engaged—
- (I) in the manufacture of such motor vehicles, vessels or aircraft; or
- (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;
- (b) the following supply of goods or services or both—
- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; - (ii) membership of a club, health and fitness centre; and
- (iii) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.
- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
- (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
- (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation: For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
(e) goods or services or both on which tax has been paid under section 10;- (f) goods or services or both received by a non-resident taxable person except on goods imported by him;
- (g) goods or services or both used for personal consumption;
- (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
- (i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
Section 17(6) of CGST Act
Section 17(6): The Government may prescribe the manner in which the credit referred to in
sub-sections (1) and (2) may be attributed.
Explanation: For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes—
- (i) land, building or any other civil structures;
- (ii) telecommunication towers; and
- (iii) pipelines laid outside the factory premises.
- Section 17 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. ↩︎