Section 17 CGST Act 2017

[ Section 17 CGST Act 2017 Notified w.e.f 01.07.2017 vide Notification No. 9/2017 – Central Tax Dated 28th June, 2017 ]

Section 17 CGST Act 2017 relates to Apportionment of credit and blocked credits. and is covered in Chapter V – Input Tax Credit 

[Note : CGST Act 2017 also known as CENTRAL GOODS AND SERVICES TAX ACT, 2017 assented by the President of India on 12-4-2017 -An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and the matters connected therewith or incidental thereto. ]

Apportionment of credit and blocked credits.

[Refer Note 1 to 11 below ]

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. [ Note 3 ]

(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.[ Note 3,8]

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed [ Note 4,8 ] , 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.

⁶ [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, 10 [except 

(i) the value of activities or transactions specified in paragraph 5 of the said Schedule; and

(ii) the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule.]]

(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. [ NOTE -1 and 4 ]

(5) [Note- 2 ] 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:—

(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;

¹¹[(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013);]

(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.

(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.

Notes on Section 17 of CGST Act 2017

11. Inserted by the Finance Act, 2023, w.e.f. 1-10-2023.

10. Substituted for “except those specified in paragraph 5 of the said Schedule” by the Finance Act, 2023, w.e.f. 1-10-2023.

9. Refer also Circular No. 92/11/2019-GST, dated 7-3-2019 [Treatment of sales promotion schemes].

8. Order No 4/2019 Central Tax Dated 29.03.2019 : ITC apportion formula in case of sale of Building before completion

7. Clauses (a), (aa), (ab) and (b) substituted for clauses (a) and (b) by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019.. Prior to their substitution, clauses (a) and (b) read as under :

(a) motor vehicles and other conveyances except when they are used—

(i) for making the following taxable supplies, namely:—

(A) further supply of such vehicles or conveyances; or

(B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods;

(b) the following supply of goods or services or both:—

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category 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;

(iii) rent-a-cab, life insurance and health insurance except where —

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(iv) travel benefits extended to employees on vacation such as leave or home travel concession;

6. .Inserted by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019.

5  : GST Settlement of funds Rules 2017 Notification Dated 27th July, 2017

4. : refer Q18 , 19 and 20 of  GST FAQs on Financial Services Sector published by CBIC

Note 4 : – Explanation.—For the purposes of this Chapter [Chapter V – Input Tax Credit ]  ,—

(1) the expressions “capital goods” shall include “plant and machinery” as defined in the Explanation to section 17;

(2) for determining the value of an exempt supply as referred to in sub-section (3) of section 17—

3. Refer  Rule 42 CGST Rules 2017 explains Manner of determination of input tax credit in respect of inputs or input services and reversal thereof and is covered in Chapter V : Input Tax Credit  : Inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2017, w.e.f. 1-7-2017.)

Refer  Rule 43 CGST Rules 2017 explains Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases and is covered in Chapter V : Input Tax Credit  : Inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2017, w.e.f. 1-7-2017.

2. Refer Rule 39 CGST Rules 2017 explains Procedure for distribution of input tax credit by Input Service Distributor and is covered in Chapter V : Input Tax Credit  : Inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2017, w.e.f. 1-7-2017.)

1.Refer  Rule 38 CGST Rules 2017 explains Claim of credit by a banking company or a financial institution and is covered in Chapter V : Input Tax Credit   and Inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2017, w.e.f. 1-7-2017.

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