Demo cars indispensable for sales promotion, allows ITC on same as capital goods: AAR

Demo cars indispensable for sales promotion, allows ITC on same as capital goods: AAR

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Demo cars indispensable for sales promotion, allows ITC on same as capital goods: AAR

Kerala AAR holds that input tax paid by a vehicle dealer on purchase of motor car used for demo purpose can be availed as input tax credit (ITC) on capital goods and set off against output tax payable under GST; AAR notes that demo cars is an indispensable tool for sales promotion by providing trial run to customers and to understand features of the vehicle, further they are supplied against tax invoices and capitalized in the books of accounts; Stating that capital goods which are used in the course or furtherance of business is entitled for input tax credit, AAR opines that “As the impugned purchase of demo car is in furtherance of business, the applicant is eligible for input tax credit”; Also clarifies that this activity does not come under the negative clause (Sec 17(5)) as after a limited period of use as demo car, the vehicles are sold at the written down book value; However, AAR clarifies that availability of ITC is subject to provisions of Sec 18(6) of GST Act i.e. in case of supply of capital goods on which ITC has been taken, the registered person shall pay an amount equal to ITC reduced by percentage points or on the transaction value of such capital goods , whichever is higher : Kerala AAR
The order was passed by Shri. B.G. Krishnan and Shri. B.S. Thyagarajababu
Advocate Harisankar V. Menon appeared on behalf of the applicant.
[TS-542-AAR-2018-NT]

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