Input Tax Credit of Demo vehicles along with repair, maintenance & insurance

In re Titania Products Private Limited (GST AAR Jharkhand)

The Advance Ruling is allowed in favour of M/s TITANIA PRODUCTS PRIVATE LIMITED, having GSTN No- 20AAECT4112F1Z2 and the company can claim and set-off the Input Tax Credit of Demo vehicles along with repair, maintenance & insurance under GST with their Liability with following conditions :-

(1) The Applicant is required to maintain up to maximum of one (1) Demo Vehicle of each model till final disposal of that said Demo Vehicle before acquiring new Demo vehicle of the same model with the condition that it is to be shown in the capital goods account.

(2) The company will not claim the depreciation on the GST Components of Demo Cars/ Demo Vehicles as expenditure under Section 37 of the Income Tax Act.

(3) The company will create GST Liability upon sales of Demo Cars/ Demo Vehicles as per sub-section (6) of Section 18.

(4) The Company will maintain separate account of Inward and Outward Supply of Demo Cars/ Demo Vehicles and will produce annual statement along with the Balance Sheet and P&L Account to the concerned Jurisdictional GST Authority.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, JHARKHAND 

Note: Under Section 100 of the JGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of JGST Act 2017, within a period of 30 days from the date of service of this order.

1. The applicant M/s TITANIA PRODUCTS PRIVATE LIMITED, having GSTN No- (20AAECT4112F1Z2) is a Private Limited Company. The business firm engaged in the business of resale and service of Motor Vehicles of the brand name “BMW”

The applicant company has submitted that:-

I. The applicant is an authorized dealer of BMW range of vehicles and an authorized service station for the same. The applicant purchases vehicles for demonstration as termed as “Demo Car” against Tax Invoices, which are taken in account as capital assets. The “Demo Car” is used for providing Trial Run/ Demonstration to the customers to understand the features and this is an essential part of marketing and sales promotion to facilitate the sales of cars.

II. Sub-section (1) of Section 16 of CGST Act states that “Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”

III. Section 17(5) of CGST Act states that “Notwithstanding anything contained in subsection (1) of Section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following namely:-

((a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely: –

(A) further supply of such motor vehicles; or

(B) transportation of passenger; or

(C) imparting training on driving such motor vehicles;

(aa) ………………

(ab) ………………….

Provided that the input tax credit in respect of such services shall be available –

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause ((aa) are used for the purpose specified therein;

(ii) ……………………………….”

2. The applicant sought Advance Ruling on the following question/issue.-

1. Can Payment of GST Liability on sale of vehicle, spares, labour can be done by utilising the Input GST on purchase of Demo Vehicle, other expenses like Repairs & Maintenance, Insurance etc., relating to Demo Vehicle used for Demonstration and or Trial run purpose?

3. As per Section 97(2) of the Central Goods and Services Tax Act, 2017 (herein after referred to as the ‘CGST ACT, 2017) and Jharkhand Goods and Services Tax Act, 2017 empowers the

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