Clarification required on Bank ITC

If any registered person conducts Taxable and as well as exempted supply of goods or services, he has to restrict Input tax attributable to Taxable supplies, a special provision was provided for Banks and financial institutions under section 17(4) to avail 50 percent ITC with out ITC restriction formula and remaining 50 percent ITC lapsed

It's optional for bank...but bank has to follow the option throughout the financial year whichever he choose.

Sec 17(2) of CGST Act: Where the goods and/or services are used by the registered person partly for effecting taxable supplies including zero- rated supplies under CGST or IGST Act and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies only. So, Proposnate ITC can be availed.

Sec 17(4) of CGST Act: A banking company or a financial institution including a NBFC, 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) of CGST Act or avail of, every month, an amount equal to 50% of the eligible ITC on inputs, capital goods and input services in that month u/s section 17(4) of CGST Act.

The option, once exercised, shall not be withdrawn during the remaining part of the financial year – first proviso to section 17(4) of the CGST Act.

In most cases, Bank, FI or NBFC, may find it easy and profitable to avail 50% of an input tax credit instead of availing input tax credit on a proportionate basis as per section 17(2) of CGST Act.

Basically 2 option 1 to claim itc on taxable services of bank and 2nd to claim 50%itc of all taxable and exempt services becoz bank has more interest related services which is exempt 50% is better but if bank has more of other than interest related inputs 1st option is beneficial