TaxTMI 
TaxTMI 
A financial institution has option to reverse 50% ITC under Section 17(4) as per Rule 38 instead of proportionate reversal under Section 17(2) as per Rule 42. If it has not made reversal and was later pointed out by the department, then can it exercise option given in 17(4) or has to reverse as per Section 17(2)Rule 42 only ?
ITC by Financial Institutions Section 17(4)
18 Sep 2025 
2 Replies 
1428 Views Asked by
Input tax credit reversal option may be prospective or retrospective, affecting whether fixed-percentage or proportionate reversal applies.
The option to use the fixed-percentage ITC reversal under Section 17(4) is contested: one view treats it as a prospective election requiring consistent application from the start of the financial year, precluding retrospective adoption and requiring proportionate reversal under Section 17(2) for past periods; an alternative view asserts no requirement to intimate the choice and that the fixed-percentage option may still be elected for earlier periods relying on analogies from prior indirect tax decisions. (AI Summary)
The option to use the fixed-percentage ITC reversal under Section 17(4) is contested: one view treats it as a prospective election requiring consistent application from the start of the financial year, precluding retrospective adoption and requiring proportionate reversal under Section 17(2) for past periods; an alternative view asserts no requirement to intimate the choice and that the fixed-percentage option may still be elected for earlier periods relying on analogies from prior indirect tax decisions. (AI Summary)