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2024 (11) TMI 1403 - HC - GSTAvailability of Input Tax Credit in respect of demo vehicles - issuance of Circular No. 231/25/2024-GST (F.NO.CBIC-20001/6/2024-GST , dated 10.09.2024 - HELD THAT - The 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 Circular No.231/25/2024- GST, dated 11.09.2024), dated 13th September 2024 - Said 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. 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. The observations of not giving benefit of Input Tax Credit to vehicles, which have been initially used as demo vehicles, is accordingly, set-aside in view of the extension of grant of availability of Input Tax Credit with respect to the demo vehicles, as clarified by the aforesaid circulars. The petitioner is entitled to the benefit of ITC.
Issues: Availability of Input Tax Credit on demo vehicles.
In the judgment delivered by the High Court, the issue of availability of Input Tax Credit (ITC) on demo vehicles was addressed. The court referred to Circular No. 231/25/2024-GST which clarified that demo vehicles used by authorized dealers for promoting sales of similar vehicles are considered capital goods under the CGST Act. The circular highlighted that ITC can be claimed on demo vehicles if they are capitalized in the dealer's books of accounts, subject to certain conditions. The court also mentioned that ITC availability on demo vehicles is not affected by their capitalization, as long as other provisions of the Act are complied with. However, the judgment noted that if depreciation is claimed on the tax component of the cost of capital goods under the Income-tax Act, ITC on that tax component shall not be allowed. Additionally, if a demo vehicle that has been capitalized is later sold by the dealer, tax obligations under the CGST Act and related rules must be met. The judgment further discussed a similar circular issued by the Haryana Government, emphasizing the availability of ITC on demo vehicles with approved seating capacity of up to 13 persons. The court set aside an earlier order that denied ITC benefits to vehicles initially used as demo vehicles. The court ruled in favor of granting ITC benefits based on the clarifications provided in the circulars. Consequently, the court overturned the previous order dated 09.10.2018 and declared that the petitioner is entitled to ITC benefits as per the terms outlined in the circulars, with further actions to be taken accordingly. The writ petition was disposed of, and any miscellaneous applications were also resolved as per the judgment.
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