GST Clarification on the issue of availability of ITC on Demo vehicles
Circular No. 231/25/2024 dated 10.09.2024 clarifies the issue of availability of ITC on demo vehicles:
1. Demo vehicles used by authorised dealers to provide trial runs and demonstrate features of the vehicles thereby promoting the sale of vehicles, can be said to be used by dealer to make further supply of “such” motor vehicles, thus ITC on demo vehicles is not blocked under Sec 17(5)of the CGST Act
2. Where the authorised dealer merely acts as an agent or service provider to the vehicle manufacturer for providing marketing services, including providing test drive to potential customers on behalf of the manufacturer and not engaged in supply of such vehicles on own account, ITC would not be excluded from blockage in terms of Sec 17(5)(A) of the CGST Act
3. Availability of ITC on demo vehicles is not impacted by capitalisation of such vehicles in the books of accounts of the dealer, subject to provisions of Section 16(3) of the CGST Act.
This clarification would help ease the ambiguity caused by multiple conflicting advance rulings on this issue.
