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2023 (8) TMI 392 - AUTHORITY FOR ADVANCE RULING, TELANGANAInput Tax Credit - Capital goods - inward supply of motor vehicle which are used for demonstration purpose in the course of business of supply of motor vehicle and was disposed off after 2 years - HELD THAT:- Sub section 5 of Section 17 of CGST Act, 2017 restricts availment of ITC on motor vehicles purchased by a tax payer even though they may be used in the course of furtherance of business. Thus, from the plain reading of the section no ITC can be claimed by the applicant or purchase of test drive vehicles even though they are used in the course of furtherance of business. The word ‘supply’ as defined under Section 7 of the CGST Act, 2017 would include sale, lease, rental etc., Thus the exception is made not only for sale of motor vehicles but for the purpose of lease, rent etc., wherein there is no immediate transfer of property in goods and such motor vehicle may be capitalized in the books of the purchaser in case of an intention to lease, rent etc. - Hence capitalizing the motor vehicle purchased does not make the tax paid on their purchases ineligible for ITC if there is a further supply of such motor vehicles within the meaning of Section 7 of CGST Act, 2017. For example supply of cars for lease / rent etc., can not be made without them being capitalised in the books of such supplier. And, whether the applicant is eligible for ITC depends on occurrence of a future event i.e., either he retains the vehicle in his work shop as a replacement vehicle or sells such vehicles. (i) If the applicant is making further supply of such vehicle is eligible for the ITC claimed. (ii) if the applicant is retaining the vehicle for his workshop as replacement vehicle as mentioned in the sales policy of MSIL, he shall not be eligible for ITC as there is no further supply at his hands. Therefore, the ITC claimed by him has to be repaid in cash in view of the amended section 16(4) notified vide notification No. 18/2022, Central Tax dt. 28.09.2022 w.e.f: 01.10.2022.
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