The Patna Authority of Advance Ruling (AAR) ruled that banking 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 Section 17(2) or avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods, and input services in that month and the rest shall lapse.
The Applicant, Uttar Bihar Gramin Bank is engaged in the business of banking as a Regional Rural Bank. It accepts deposits from its customers. It is statutorily required to pay a premium to Deposit Insurance and Credit Guarantee Corporation (DICGC) on these deposits, on which GST is collected by the DICGC.
Now the bank is available and intends to continue to avail credit of GST paid, as prescribed under respective GST Acts, as it is an inward supply for the purpose of its banking business.
To avoid any future litigation, the bank sought the advance ruling, whether input credit of GST on this inward supply is just and proper under the GST law.
The Authority consisting of Dharmajeet Kumar and Ashok Kumar ruled that if Banking Company strictly complies with Rule 38 of the Central or Bihar Service Tax Rules, 2017 then instead of complying with Section 17(2) of Central or Bihar Service Tax Act, 2017, the benefit availed directly from Section 17(4) by the applicant is lawful.
The Authority further observed that the Banking Company may refer to the procedure specified in Rule 38 so as to avail the option under Section 17(4) of Central or Bihar Service Tax Rules, 2017.
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