ITC available to Demo Vehicles: Punjab and Haryana HC Quashes AAAR ruling against BMW [Read Order]
It was held that the petitioner is entitled to the benefit of ITC in the aforesaid terms, with consequent actions to follow
Haryana High Court – AAAR Tax on Vehicles – Tax on demo vehicles – Vehicles tax – BMW Tax – TAXSCAN
Haryana High Court – AAAR Tax on Vehicles – Tax on demo vehicles – Vehicles tax – BMW Tax – TAXSCAN
In a ruling in favour of BMW India Pvt. Ltd, the Punjab and Haryana High Court held that Input Tax Credit is Available to Demo vehicles and quashed the ruling given by Appellate Authority of Advance Ruling ( AAAR ) which is contrary to the same..
A clarification of availability of Input Tax Credit in respect of demo vehicles, has been issued vide Circular No.231/25/2024-GST (F.NO.CBIC-20001/6/2024-GST], dated 10.09.2024, wherein, it has been held as input tax credit (ITC) is available on demo vehicles in cases where such vehicles are capitalized in the books of account by the authorized dealers.
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As per provisions of section 16(1) of CGST Act, every registered taxpayer is entitled to take input tax credit charged on any supply of goods and services made to him, where such goods or services are used in the course or furtherance of business of such person, subject to such conditions and restrictions as may be prescribed and in the manner which is specified.
As per the circular it was evident that as the demo vehicles are used by the authorized dealers to promote further sale of motor vehicles of the similar type and therefore, such vehicles appear to be used in the course or furtherance of business of the authorized dealers. Where such vehicles are capitalized in the books of accounts by the authorized dealer, the said vehicle falls in the definition of “capital goods” under section 2(19) of CGST Act. As per provision of section 16(1) of CGST Act, subject to such conditions and restrictions as may be prescribed, a recipient of goods is entitled to take input tax credit in respect of tax charged on the inward supply of any goods, which as per definition of “goods” under section 2(52) of CGST Act, includes even capital goods.
Further, section 2(19) of CGST Act also recognizes that capital goods are used or intended to be used in the course or furtherance of business. Accordingly, availability of input tax credit on demo vehicles is not affected by way of capitalization of such vehicles in the books of account of the authorized dealers, subject to other provisions of the Act.
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The said clarification has been also taken note of by the Haryana Government, and they have issued similar clarification vide Circular No.231/25-HGST/2024/GST-II (CBIC Circlar No.231/25/2024- GST, dated 11.09.2024), dated 13th September 2024.
The division bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth has observed that the circular discussed the availability of Input Tax Credit on demo vehicles, which are motor vehicles for transportation of passengers having approved seating capacity of not more than 13 persons in terms of clause(a) of section 17(5) of Haryana Goods & Services Tax Act, 2017.
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Further, it deals with the availability of the Input Tax Credit on demo vehicles in cases where such vehicles are capitalized in the books of account by the authorized dealers. Keeping in view thereto, the court set aside the observations of not giving benefit of Input Tax Credit to vehicles, which have been initially used as demo vehicles.
It was held that the petitioner is entitled to the benefit of ITC in the aforesaid terms, with consequent actions to follow.
To Read the full text of the Order CLICK HERE
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