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2019 (3) TMI 1850 - AAR - GSTInput Tax Credit - availability of credit on capital goods (demo cars) and set off against output tax payable under GST - availability of credit on ancillary input services such as insurance and repair and maintenance availed in respect of the demo cars - Section 16(1) of the CGST Act - HELD THAT:- Section 16(1) relates to entitlement with respect to credit of input tax charged on any supply of goods and services or both to the recipient which are used or intended to be used in course or furtherance of his business. It means that the recipient is entitled to credit of input tax charged on supply of inputs as well as capital goods to him - A plain reading of the provisions contained in Section 17(5)(a) of CGST Act suggests that the provisions of Section 17(5)(a) of the Act are not only over-riding provisions with respect to Section 16(1) and Section 18(1), but are also exhaustive in nature and limits the scope of Input tax credit with respect to motor vehicles. The use of the words “Notwithstanding anything contained in sub-section (1) of section 16” emphasizes that the Input Tax Credit can be availed on motor vehicles only if the conditions prescribed under Section 17(5)(a) are satisfied. So, even if, the demo vehicles are capitalized in the book of accounts and are used or intended to be used in the course or furtherance of business, the Input Tax Credit with respect to these vehicles cannot be availed by the recipient - The applicant has further contented that the demo vehicles are eventually sold to buyers in open market and GST is charged on such supply. A close scrutiny of Section 17(5)(a) reveals that the term supply has been prefixed by the word “future” and due weightage should be given to the prefix. In essence the term further supply connotes “resale” which is not the purpose of the applicant behind purchasing demo cars. Availing of Input Tax Credit on the ancillary input services such as insurance and repair & maintenance - HELD THAT:- The demo vehicles are not used for the purposes specified under Section 17(5)(a) i.e. for making taxable supplies, including further supply of such motor vehicles and are, therefore, not covered under exception provided under section 17(5)(ab)(i) - These demo vehicles are also not covered under exceptions mentioned under section 17(5)(ab)(ii).
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