2022 (3) TMI 487 - AAAR - GST

Input tax credit - Stock transfer - IGST and Compensation Cess paid on receipt of cars (on stock transfer basis) for use in relation to specified business activities and thereafter onwards supply to dealers after use by the Applicant unit for a limited period of time - HELD THAT - None of the uses to which the BMW Vehicles are put to, fits into the uses which find mention in sub-Section 17(5). The vehicles under question are not meant for further supply of such motor vehicles' i.e further supply as such , but are first put to the mentioned uses. These are disposed of after prolonged use, which may even not restrict to 12 months as mentioned by the Appellant. If the argument of the party is allowed then in that case all the motor vehicles, irrespective of the nature of Supply will be eligible for ITC across the industries. It will no longer be a restricted clause for Car Dealers, but will be an open-clause for all the trade and industry to avail the ITC on all the Vehicles purchased by them. This has never been the intent of the Parliament - in the very first demonstration run demo car loses the character of the new motor vehicle and demo vehicles is sold akin to second hand goods and which is different from new Vehicle and accordingly treated differently under. GST law, so the demo car is not an input. So it appears that the BMW Vehicles received by the Appellant under stock transfer have never been received with the intent to simply 'further supply of such motor vehicles/'sell as such'. Input Tax Credit on these vehicles, thus, cannot be allowed. The input credit of the Services of repair/ insurance/ maintenance used in respect of said vehicles with seating capacity up to 13 passengers, cannot be allowed.

Summary

Issues:
Admissibility of Input Tax Credit (ITC) on motor vehicles used and then sold by the taxpayer for limited period.

Detailed Analysis:

Background:
The appeal was filed by M/s. BMW India Pvt. Ltd. against an Advance Ruling denying them Input Tax Credit (ITC) on motor vehicles used in various business activities and later sold to dealers. The vehicles were received as inter-state stock transfers and used for specific purposes before being sold.

Facts of the Case:
The taxpayer used BMW vehicles for training, marketing, press, sales, and visitor transportation purposes before selling them as old and used vehicles. They claimed ITC on the IGST and Compensation Cess paid on these vehicles, citing Notification No.08/2018-C.T. (Rate) for concessional GST rates.

Question for Advance Ruling:
The main issue was whether the taxpayer could avail ITC on the IGST and Compensation Cess paid on the vehicles received for business activities and subsequently sold after a limited period of use.

Ruling by Advance Ruling Authority (AAR):
The AAR ruled against allowing ITC on the motor vehicles based on the specific provisions of the CGST Act and the intended use of the vehicles. They highlighted the restrictions under Section 17(5) of the Act regarding the admissibility of ITC on motor vehicles.

Grounds of Appeal:
The appellant challenged the AAR's ruling, arguing that they should be entitled to ITC as the vehicles were further used for taxable supply, and no time limit was prescribed for such further supply. They also claimed that the AAR did not consider their submissions adequately.

Discussion and Findings:
The Appellate Authority analyzed the provisions of the CGST Act regarding Input Tax Credit on capital goods and the restrictions under Section 17(5). They emphasized that ITC is generally available on goods used in the course of business but noted the specific exclusion of motor vehicles under certain conditions.

Conclusion:
The Appellate Authority concluded that the BMW vehicles in question were not used for the purposes specified in Section 17(5) for availing ITC. They highlighted that the vehicles were not intended for further supply as such, as they were first used for specific business activities before being sold. Therefore, the ITC on these vehicles and related services could not be allowed based on the legislative intent and the specific provisions of the law.

In light of these findings, the appeal was dismissed, upholding the ruling that the taxpayer was not entitled to avail Input Tax Credit on the motor vehicles used and subsequently sold.