ITC on Electric Bikes, Goods and Services Tax - GST

[Adarsh Gupta]

Hi,

Whether ITC is eligible to be claimed under CGST Act 2017 for import of two wheeler Electric Bikes in India to be used for exhibition purpose?

Regards,

ADARSH GUPTA

Posts / Replies

[Ganeshan Kalyani]

In my view yes. The import of bike is in Course and furtherance of business. Your business is bike selling so the line of business is same so the provision of sec 17(5) will not apply and credit is allowed.

[Atul Rathod]

It’s same like demo car. However if you show it as asset the credit could be denied, if you show it as stock than could be allowed. Though advance ruling has been issued that credit can be allowed on demo car. The same principle applies to even instant case

[Alkesh Jani]

Sir,

The imported two wheeler Electric Bike for exhibition will be send back to the country of Origin after exhibition is over or it will be sold here in India?

Thanks

[Adarsh Gupta]

Just to clarify that the importer was not in the business of selling electric bikes. He is a OEM supplier and the bike will be send back to the offshore supplier after exhibition. To be specific, whether electric bikes qualify the bar of motor vehicles u/s 17(5)?

Regards.

[Alkesh Jani]

Sir,

The goods can be imported by execution of bond, whereby you can also import the same on payment of duty and can claim refund in terms of Customs Notification No.157/90-Customs dated 28.03.1990 and also refer Re-Export of Imported Goods (Drawback of Customs Duties) Rules, 1995.

Electric Bike does not fall within the definition of Motor Vehicle, the definition of same is given under Motor Vehicle Act.

Thanks

[Alkesh Jani]

In continuation the Definition of Motor Vehicle is given below for ready reference

"means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding 9[twenty-five cubic centimetres];"

[YAGAY andSUN]

In our view it is allowed. Following is the AAR for your kind perusal.

The Maharashtra Authority for Advance Ruling (AAR) held that Input tax credit (ITC) charged on inward supply of demo cars which is used for Demonstration purpose in the course of business of supply of Motor Vehicle as an input tax credit (ITC) on capital goods and the same can be utilized for payment of output tax payable under this Act. The Applicant is an authorized dealer for Maruti Suzuki India Limited for the supply of motor vehicles and spares and for servicing as also for some other commercial vehicle manufacturers. The Applicant has made purchases of motor vehicles against tax invoice which are reflecting in the books of accounts of the Applicant as capital goods. The vehicles are used as demo cars for providing trial run to customers to understand the features of the vehicle. This is an essential part of marketing and sales promotion to facilitate the supply of cars. As per the dealership norms with Maruti Suzuki India Limited, the applicant is required to maintain at least one Demo vehicle of each model per location. The Applicant purchases these Demo vehicles against a tax invoice. The said Demo vehicles are capital goods accounted under Fixed Assets of the Company excluding the GST component. The applicant has not claimed depreciation on the tax component of the said demo cars nor claimed as business expenditure. Every model of demo cars is used for demonstration for a limited period. They are replaced every two years or 40,000 Kms whichever is earlier. Secondly, the vehicle keeps on changing due to competition in the market and changing demands. The customers always demand for the brand new model of cars for a test drive. Hence, it mandatory for the Applicant to buy a new Demo vehicle on the launch of the new model. The Demo vehicles are sold after paying the applicable taxes on sale value at that point in time. Thereafter, the said vehicles are sold after paying the applicable taxes on sale value at that point in time. Since the applicant will be making further supplies of the Demo vehicles, and there is no time limit prescribed in the GST Act for making such further supplies. The bench constituting of Vineetha Sekar and A.A Chahure ruled on an application filed by chowgule Industries private limited. The ITC availed by them on capital goods can be utilized for payment of output tax payable under this Act. The manner of utilization of ITC is provided as per provisions of Section 49 of the CGST Act. Section 18 of the CGST Act deals with the availability of credit in special circumstances. As per Section 18(6) of the CGST Act, when there is a supply of capital goods on which ITC has been taken, as in the subject case then the applicant shall pay an amount equal to the ITC taken on the said Demo Vehicles reduced by such percentage points as may be prescribed or the tax on the transaction value of such Demo Vehicles, whichever is higher. The applicant is entitled to avail Input tax credit (ITC) charged on inward supply of Motor Vehicle which is used for Demonstration purpose in the course of business of supply of Motor Vehicle as an input tax credit (ITC) on capital goods and the same can be utilized for payment of output tax payable under this Act.