TaxTMI 
TaxTMI 
We are an NBFC. Every month, we reverse 50% of the eligible ITC as per Rule 38. So for 50% ITC which is reversed, can it be added back to the fixed asset and can depreciation be claimed on that portion (on 50% of the GST amount), taking into account Section 16(3) of the CGST Act, 2017? Or can it be said that since it has first been availed and the reversed, the right to claim depreciation is lost.
Depreciation on the unclaimed ITC portion - NBFC
28 Sep 2026 
4 Replies 
61 Views Asked by
Depreciation on reversed input tax credit remains available for capital goods when an NBFC reverses eligible credit.
For an NBFC, the reversed or lapsed portion of input tax credit attributable to capital goods may be included for depreciation purposes under the Income-tax Act. The stated view is that prior availment of eligible credit followed by its monthly reversal under Rule 38 does not preclude depreciation on the reversed portion, subject to the restriction relating to depreciation and input tax credit. (AI Summary)
For an NBFC, the reversed or lapsed portion of input tax credit attributable to capital goods may be included for depreciation purposes under the Income-tax Act. The stated view is that prior availment of eligible credit followed by its monthly reversal under Rule 38 does not preclude depreciation on the reversed portion, subject to the restriction relating to depreciation and input tax credit. (AI Summary)