Eligibility for inputs tax credit on Demo Vehicles

In re Khatwani Sales And Services LLP (GST AAR Madhya Pradesh)

Q. Whether Input tax credit on the Demo vehicle purchased can be availed as the same will be capitalized in books.

Ans: The Applicant has submitted that the firm will not claim depreciation on the tax component of Demo Vehicles which are capitalized in the books of accounts. We find that not Charging depreciation on the tax component is as per other relevant provisions of the GST Act. But that can not affect the applicability of provisions of Section 17(5)(a) of GST Act, according to which the applicant is not eligible for Input Tax Credit on Demo vehicles, as the same are not covered by any of the exception given clause (A), (B) or (C) of Sec. 17(5)(a).

We also find that the eligibility for inputs tax credit on Demo Vehicles can not be decided on the basis of their capitalisation, or payment of GST at the time of their sale in the subsequent year.

7.5 Thus, we find that there is clear provision in law for admissibility of Input tax credit on motor vehicles in any of the three conditions prescribed in clause (A), (B) and (C) of section 17(5)(a) of GST Act. As the applicant’s Demo vehicles do not comply any of the said conditions, therefore, the applicant is not eligible for Input tax credit on Demo vehicles in view of provisions of Section 17(5)(a) of GST Act in spite of the fact that the Demo Vehicles are used by the applicant for furtherance of their business.

Please become a Premium member. If you are already a Premium member, login here to access the full content.