Maruti Dealer eligible to obtain Input Tax Credit on Purchase and Use of Demo Vehicles: AAR [Read Order]

The Authority for Advance Rulings (AAR), Goa has, while considering an application by a dealer of Maruti Suzuki held that the dealer can obtain input tax credit on the purchase and use of demo vehicles under GST.

The applicant is an authorised dealer for Maruti Suzuki India Ltd. for sale of motor vehicles and spares and for servicing. The applicant sought for a ruling as to whether ITC on the motor vehicle purchased for demonstration purpose can be availed as a credit on Capital goods and set off against output tax payable under GST.

The authority held that the applicant has purchased the demo vehicles against tax invoices from the supplier after paying taxes. It was observed that a demo vehicle is an indispensable tool for promotion for sale by providing trial runs to the customer and the applicant also capitalises the purchase of such vehicles in the books of accounts. It was, therefore, held that such capital goods which are used in the course or furtherance of business is entitled to Input Tax credit and can be set off against output tax payable under GST.

“In the instant case, the applicant purchases demo vehicles against tax invoices from the supplier after paying taxes. The demo vehicle is indispensable tools for the promotion of sale by providing trail run to the customer. The applicant capitalizes the purchase of such vehicles in the books of accounts. The capital goods which are used in the course or furtherance of business is entitled to Input Tax Credit,” the authority said.