BMW India Pvt. Ltd. Vs Appellate Authority for Advance Ruling for the State of Haryana and another (Punjab and Haryana High Court)
Summary: In the case of BMW India Pvt. Ltd. vs. Appellate Authority for Advance Ruling for the State of Haryana and another, the Punjab and Haryana High Court addressed the availability of Input Tax Credit (ITC) for demo vehicles. The Court referred to Circular No. 231/25/2024-GST dated September 10, 2024, issued by the Central Board of Indirect Taxes and Customs (CBIC), which clarified that demo vehicles used by authorized dealers to promote vehicle sales and capitalized in their accounts qualify as “capital goods” under Section 2(19) of the Central Goods and Services Tax (CGST) Act, 2017. Such vehicles are deemed to be used in the course or furtherance of business, making ITC available under Section 16(1) of the CGST Act. However, the ITC is subject to specific conditions, such as the restriction under Section 16(3) that disallows ITC if depreciation is claimed on the tax component under the Income Tax Act, 1961.
The Haryana Government adopted a similar stance through Circular No. 231/25-HGST/2024/GST-II dated September 13, 2024. The Court noted that earlier observations denying ITC for demo vehicles were inconsistent with these clarifications. Consequently, it set aside the denial of ITC and directed that the petitioner, BMW India Pvt. Ltd., be entitled to ITC as per the conditions outlined in the circulars. This judgment underscores the importance of consistent interpretation of GST provisions and reinforces the entitlement to ITC for capitalized demo vehicles when used in business activities.
