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TMI Blog2019 (3) TMI 1850X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 per section 16(1) of the CGST Act, 2017, every registered person shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (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 SGST Act are identical and unless a special reference is made, a reference to CGST Act shall also mean a ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 connotes "resale" which is not the purpose of the applicant behind purchasing demo cars. 4.7 As far as the issue of availing of Input Tax Credit on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 services in light of the provisions contained in Section 17(5)(a) and Section 17(2) respectively.
Ordered accordingly.
To be communicated. X X X X Extracts X X X X X X X X Extracts X X X X
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