TMI Blog2022 (3) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the purpose of demonstration before the prospective customers. Then they are sold like second hand goods. The law provides for ITC in case of further Supply of said vehicles. But here, first the vehicles are purchased, then they are diverted and used for Demonstration of 2 years or so, and in the first demonstration run it loses the character of the new vehicle and demo vehicles is sold akin to second hand goods and which is different from new Vehicle and accordingly treated differently under GST law. Thus it cannot be said that the demo vehicle is for further supply of such motor vehicles'. This very restricted and specific provision has been provided in law for Motor Vehicles. The purpose and intent of the law is thus very clear. Thus by allowing the ITC this way will be ultra vires the basic provisions of 'further supply of such motor vehicles' - the use to which the Demo Vehicles are put to, does not fit into the uses which find mention in sub-Section 17(5). The vehicles under question are not meant for 'further supply of such motor vehicles', but are first put to the mentioned uses. These are disposed of after prolonged use, which may even not res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods or plant and machinery determined under section 15, whichever is higher Appellant submits that after use of the Demo Cars for demonstration purposes before the prospective buyers for a specific period these are sold off, on payment of GST. From the above it is clear that, such vehicles are capitalized in the book of accounts and when sold, the GST is paid on the transacted value. QUESTIONS on which Advance Ruling was requested by the Appellant: Whether Input Tax Credit (ITC) can be availed on such Capital Goods (demo cars) and set off against output tax payable under GST. Whether Input Tax Credit (ITC) can be availed on ancillary input services such as insurance and repair and maintenance availed in respect of demo cars. RULING by Advance Ruling Authority (AAR): The Advance Ruling Authority (AAR) gave following Rulings on the abovementioned Questions: RULING: So in the light of above discussion the Ruling of the Authority on the questions raised in the application is as under:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The personal hearing in the case was conducted on 24.03.2021. Sh. Deepak Juneja, Advocate appeared before the Members of the Appellate Authority for Advance Ruling and emphasized on the submissions already made in the Appeal and no new point was added. DISCUSSIONS AND FINDINGS: As per the Statement of Facts submitted as a part of the Appeal, the Goods in question are Motor Vehicles purchased by the Appellant along side other cars meant for sale, but first used as Demo Cars for. maximum 2 years. From the Questions for which Advance Ruling was applied and the present appeal has been filed, the issue for determination presently is admissibility of Input Tax Credit (ITC) on the Appellants' motor vehicles which they sell after limited period use as demo cars. ITC is admissible generally on all the goods which fall under the definition of Inputs. Inputs have been defined under the CGST Act 2017 in Section 2(59) as,- input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business . The Capital Goods have been defined under the Act in Section 2(19) as,- Capital goods means goods, the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged,- (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;] As may be seen, a plain reading of this Sub-section indicates the legislative intent clearly that when used for other than the intended purposes, the ITC cannot be allowed on the Motor Vehicles of seating capacity up to 13 persons. The intended purposes are also limited i.e. numbered only three, viz.:- further supply of such motor vehicles; or transportation of passengers; or imparting training on driving such motor vehicles. As mentioned supra, the Demo Vehicles in respect of which the Question about admissibility of ITC has been raised for Advance Ruling, have been used, have been used for the purpose of demonstration before the prospective customers. Then they are sold like second hand goods. The law provides for ITC in case of further Supply of said vehicles . But here, first the vehicles are purchased, then they are diverted and used ..... X X X X Extracts X X X X X X X X Extracts X X X X
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