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 
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Depreciation on lapsed input tax credit may follow capitalisation of permanently reversed credit on NBFC capital goods.
Depreciation on the portion of input tax credit reversed by an NBFC under the 50% credit mechanism in Rule 38 is examined in relation to capital goods. The view advanced characterises unreclaimable credit as a cost borne by the NBFC and part of the actual purchase cost of capital goods. On that view, the lapsed amount may be capitalised and depreciation claimed under the Income-tax framework, subject to section 16(3) of the CGST Act. (AI Summary)
Depreciation on the portion of input tax credit reversed by an NBFC under the 50% credit mechanism in Rule 38 is examined in relation to capital goods. The view advanced characterises unreclaimable credit as a cost borne by the NBFC and part of the actual purchase cost of capital goods. On that view, the lapsed amount may be capitalised and depreciation claimed under the Income-tax framework, subject to section 16(3) of the CGST Act. (AI Summary)