TMI Blog2020 (1) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... ELD THAT:- Since the applicant will be making further supplies of the Demo vehicles, and there is no time limit prescribed in the GST Act for making such further supplies, we are of the opinion that they will be eligible to avail ITC in the subject case. Whether the ITC availed by them on capital goods can be utilized for payment of output tax payable under this Act? - HELD THAT:- The manner of utilization of ITC is provided as per provisions of Section 49 of the CGST Act. Section 18 of the CGST Act deals with availability of credit in special circumstances. As per Section 18(6) of the CGST Act, when there is a supply of capital goods on which ITC has been taken, as in the subject case then the applicant shall pay an amount equal to the ITC taken on the said Demo Vehicles reduced by such percentage points as may be prescribed or the tax on the transaction value of such Demo Vehicles, whichever is higher. - GST-ARA-18/2019-20/B-121 - - - Dated:- 26-12-2019 - SMT. P. VINITHA SEKHAR, AND SHRI. A.A. CHAHURE, MEMBER PROCEEDINGS (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax component of the said demo cars nor claimed as business expenditure u/s. 37 of the Income Tax Act. Every model of demo cars are used for demonstration for a limited period. They are generally replaced every two years or 40,000 Kms whichever is earlier. Secondly, the vehicle model keep on changing due to competition in the market and changing demands of the customers. The customers always demands for brand new model of cars for test Drive. Hence, it become mandatory for the Applicant to buy new Demo vehicle on launch of new model of vehicle. The Demo vehicles are sold after paying the applicable taxes on sale value at that point of time. According to Section 16(1) of the GST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both which are used or intended to be used in the course or furtherance of his business. As per Section 2 (19), capital goods' means goods. The value of which is capitalized in the books of accounts of the person claiming the input tax credit and which are used or intended to be used in the course of furtherance of business. The Demonstration vehicles purchased from suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are reproduced as under: The Applicant is regularly collecting paying GST in respect of sales servicing income also availing GST ITC. Applicant further submits that they have filed periodical returns in GSTR-1 and GSTR-3B during the period for which advance ruling is sought. As per the Sales Policy Bulletin: SPB No. 635 dated 15/09/2010 with the Maruti Suzuki India Ltd., the Applicant is required to maintain at least one Demo vehicle of each model per location. Applicant purchases these Demo vehicles against tax invoice. The said Demo vehicles are capital goods accounted under Fixed Assets of the Company excluding GST component. The GST component of the said demo cars is not utilised for claiming depreciation nor claimed as business expenditure u/s. 37 of the Income Tax Act. These vehicles are exclusively used as demo vehicles and the outside body it is marked as demo vehicles and used only for the trials and demos which helps in marketing the products, so each brand of vehicle will have at least one demo vehicle. The vehicles are used by the Applicant for demonstration to/Test Drive by the customers who are interested in buying vehicles. The Demo vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or providing trial run to customers to understand the features of the vehicle. This is an essential part of marketing and sales promotion to facilitate supply of cars. These demo cars are capital goods accounted under fixed assets of the company excluding GST component. The assessee does not claim depreciation on the tax component of the said demo cars nor claim business expenditure under Section 37 of the Income Tax Act. These demo cars are generally replaced every two years or 40000 kilometers and then sold after paying the applicable taxes on sale value at that point of time. Thus it appears that these demo vehicles are used in the course of furtherance of business. Further assessee submitted that as per Section 17(5) - (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely: (a) motor vehicles and other conveyances except when they are used (i) for making the following taxable supplies, namely: (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent of the said demo cars nor claimed as business expenditure u/s. 37 of the Income Tax Act. These Demo vehicles are sold, after a certain period of time, after paying the applicable taxes on sale value at that point of time. 5.3 From the submissions made by the applicant we observe that they are dealers of Maruti Suzuki India Limited, a company which is a manufacturer of motor vehicles. As a dealer in this line of business it is of utmost necessity to have vehicles for providing trial run to customers to understand the features of the vehicle. These vehicles, known as Demo Vehicles are an important and essential requirement for marketing and promoting the sale of motor vehicles. Thus we find that these Demo Vehicles are being used to further their business i.e. sale of motor vehicles and further, the purchases of such Demo Vehicles are capitalized in their books of accounts. 5.4 To answer their question whether they are entitled to avail Input tax credit (ITC) charged on inward supply of such Demo Motor Vehicle, as ITC on capital goods and whether the same can be utilized for payment of output tax payable under this Act, we refer to the provisions of Chapter V of the CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, it is to be seen whether Section 17 (5) of the said Act debars the applicant from taking credit. Section 17 of CGST Act, 2017, as reproduced under, explains Apportionment of credit and blocked credits : Section 17 (5): Notwithstanding anything contained in sub-section 0) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; A reading of Section 17 (5) indicates that ITC shall be available in respect of motor vehicles which are further supplied as such. 5.9 In the subject case, the applicant has submitted that every model of demo cars is used by them for demonstration only for a limited period i.e. every two years or 40,000 Kms whichever is earlier (the documents submitted by the applicant on 14.11.2019 reveal that the two year period ..... 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