The Central Board of Indirect Taxes and Customs (CBIC) has clarified the application of Section 17(4) of the Central Goods and Services Tax (CGST) Act, 2017, for the claim and reversal of the ITC by banks, financial institutions and non-banking financial companies (NBFCs).
The objective of this circular is to ensure uniformity in the implementation of GST provisions and to address discrepancies in the procedures followed by taxpayers.
CBIC Specified the Below-mentioned Issues:
Issue No. 1: Should all registrations of banking companies or financial institutions, including non-banking financial companies, regardless of whether they engage in providing services like accepting deposits or extending loans and advances, opt to comply with the provisions of section 17(4) of the CGST Act?
Issue No 2: Is the second proviso to section 17(4) of the CGST Act applicable to the tax paid on supplies made by a registered person who has the same PAN as a banking company or a financial institution, including a non-banking financial company, when that registered person chooses not to comply with the provisions of section 17(4) of the CGST Act?
Issue No. 3: What is the correct method to report the claim and reversal of input tax credit (ITC) in FORM GSTR-3B, to be followed by a banking company or financial institution including a non-banking financial company, engaged in supplying services through the way of accepting deposits, extending loans or advances, which chooses to comply with the provisions of section 17(4) of the CGST Act?
GST Circular No. 261/2026
