TMI Blog2019 (3) TMI 1850X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispensable business practice and Goods and Services Tax is paid on the purchase of these demo cars. Each demo car is used for demonstration for a maximum period of 2 years from the date of purchase after which it can be sold as the second hand car. The applicant maintains that the GST is paid on taxable value as per section 18(6) of CGST Act, 2017. Issue for Ruling: 2.1 Whether Input Tax Credit (ITC) can be availed on such capital goods (demo cars) and set off against output tax payable under GST. 2.2 Whether Input Tax Credit (ITC) can be availed on the ancillary input services such as insurance and repair and maintenance availed in respect of the demo cars. Discussion: 3.1 The contention of the appellant is that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17(5)(a) reads as under: 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 for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (As stands amended w.e.f 01.02.2019, Notification No. 2/2019- Central tax dated 29th January, 2019) Note : The provisions of CGST Act and SG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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. 4.6 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 connote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ii). So, in light of the above discussion, the Ruling of the Authority on the questions raised in the application is as under: 5.1 The Goods and Services Tax paid on the purchase of demo vehicles cannot be availed as input Tax Credit and set off against output tax payable under the GST. 5.2 No Input Tax Credit can be availed on the ancillary input services such as insurance and repair maintenance in respect of above mentioned vehicles. 6. As far as the admissibility of Input tax credit prior to coming into effect of Notification No. 2/2019- Central tax dated 29th January, 2019, the Advance ruling Authority is of the view that the same was inadmissible with respect to purchase of Demo vehicles as well as ancillary input ser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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