The applicant was authorized dealer of KIA for sales & services of vehicles in Jabalpur. It bought the vehicles from the supplier against tax bills after paying taxes and capitalizing the demonstration vehicles in the books of accounts.
It filed a request for advance ruling to determine whether the input tax credit on the vehicle purchased for demo purpose can be used.
The Applicant declared that they would not claim depreciation on tax component of the capitalized Demo Vehicles.
The Authority for Advance Ruling observed that there is clear provision in law for admissibility of Input tax credit on motor vehicles. The applicant would require Demo Vehicles as they would be essential for promoting the sale of motor vehicles.
But the input can’t be taken unless motor vehicles for transport of persons having approved seating capacity of no more than thirteen persons would be used for further supply of such motor vehicles or transport or train passengers on driving such cars.
Subsequent sale of Demo Vehicle after one or two years cannot be said to be for further supply.
Therefore, it was held that the applicant would not be eligible for Input tax credit on Demo vehicles in view of provisions of Section 17(5)(a) of GST Act although the Demo Vehicles would be used by the applicant for furtherance of their business.
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