2021 (1) TMI 692 - AAR - GST

Input tax credit (ITC) - Demo vehicle purchased - whether credit can be availed as the same will he capitalized in books - HELD THAT - The Applicant has submitted that the firm will not claim depreciation on the tax component of Demo Vehicles which are capitalized in the books of accounts. We find that not charging depreciation on the tax component, is as per other relevant provisions of the GST Act. But. that can not affect the applicability of provisions of Section 17(5)(a) of GST Act according to which the applicant is not eligible for Input tax credit on Demo Vehicles. as the same arc not covered by any of the exceptions given clause (A). (B) or (C) of Sec. 17(5)(a) - It is found that the eligibility for inputs tax credit on Demo Vehicles can not he decided on the basis of their capitalisation. or payment of GST at the time of their sale in the subsequent year. There is clear provision in law for admissibility of Input tax credit on motor vehicles in any of' the three conditions prescribed in clause (A), (B) and (C) of Section 17(5)(a) of GST Act. As the applicant's Demo vehicles do not comply any of the said conditions. therefore. the applicant is not eligible for Input tax credit on Demo vehicles in view of provisions of Section 17(5)(a) of GST Act in spite of the filet that the Demo Vehicles are used by the applicant for furtherance of their business.

Summary

Issues:
- Eligibility for Input Tax Credit on demo vehicles purchased for business purposes.

Analysis:
1. Facts of the Case:
- The applicant, an authorized dealer of a car brand, sought an advance ruling on availing Input Tax Credit (ITC) for demo vehicles used for business purposes.

2. Question Raised:
- The main issue was whether ITC on demo vehicles can be claimed as they are capitalized in the books of accounts.

3. Department's View:
- The department's view was that ITC on motor vehicles purchased for demo purposes cannot be availed due to specific provisions of the CGST Act.

4. Applicant's Arguments:
- The applicant argued that demo vehicles are used for business promotion, training, and test drives, making them eligible for ITC under relevant provisions.

5. Discussion and Findings:
- The Authority noted that while demo vehicles are essential for business, the specific provisions of Section 17(5)(a) of the GST Act restrict ITC eligibility for motor vehicles unless used for specific purposes.

6. Legal Interpretation:
- The Authority clarified that the exceptions in Section 17(5)(a) must be met for ITC eligibility, and mere capitalization or future sale of demo vehicles does not override these provisions.

7. Ruling:
- The ruling concluded that the applicant is not eligible for ITC on demo vehicles as they do not meet the exceptions in Section 17(5)(a) of the GST Act, despite being used for business purposes.

8. Validity:
- The ruling is valid unless declared void under specific provisions of the GST Act, providing a clear decision on the ITC eligibility for demo vehicles based on legal interpretations and relevant provisions.