In re Sai Service Private Limited (GST AAR Kerala)
In the case of In re Sai Service Private Limited, the Authority for Advance Rulings (AAR) Kerala examined whether the applicant, engaged in the motor vehicle supply business, could claim Input Tax Credit (ITC) on motor vehicles used for demonstration purposes. The applicant argued that demo vehicles, essential for sales promotion and used for test drives, are capitalized as fixed assets and not eligible for ITC initially. However, they claimed eligibility for ITC under Section 16(1) of the CGST Act, 2017, since the demo cars are later sold as second-hand vehicles. The applicant contended that Section 17(5) of the CGST Act, which restricts ITC on motor vehicles for the transportation of persons, should not apply as demo cars are used for business promotion, not passenger transport. The AAR agreed, stating that demo cars used for further supply after the demonstration period are eligible for ITC, provided no depreciation is claimed on the tax component and the cars are eventually sold. Thus, the ruling affirmed the applicant’s entitlement to avail ITC on demo vehicles, with conditions.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KERALA
1. M/s. SAI SERVICE PRIVATE LIMITED, Pune with registered office at 50/1115 L, Cheranelloor Road, Edappally, Ernakulam, Kerala, 682024 (hereinafter referred to as the applicant) is in the business of supply of motor cars and services related to the same.
