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TMI Blog2020 (11) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... l input tax credit on inward supply of motor vehicles which are used for demonstration purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... f food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, life insurance and health insurance except where when inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; ii) membership of a club, health and fitness centre; iii) Travel benefits extended to employees on vacation such as leave or home travel concession; c) Works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; d) Goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. e) Goods or services or both on which tax has been paid under section 10 i.e. Composition Scheme. f) Goods or services or both received by a non-resident taxable person except on goods import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers at their specific locations. C) Imparting training on driving, flying, navigating such vehicles or conveyance Here main purpose of the Demo vehicle is to provide the training about the features of the vehicle which is in the course of business. Hence credit on demo cars does not fall within the restrictions placed under Section 17(5) on blocking credit on motor vehicle but is instead squarely covered by exceptions mentioned therein, being 17(5)(a)(A) and (C). Here Following points should also be considered 1) According to applicant Demo vehicle purchased is in the course of carrying out his business, the appellant is mandatory required to keep demo vehicles of each model as per their dealership agreement, of the KIA Motors Corporation and since the models keep changing at a fast pace due to competition in the market, it marks as a regular business feature for the appellant. 2) Further, the appellant purchases Demo Vehicle from Kia Motors Corporation against tax invoice after paying tax and capitalizes the same in his books of accounts and has not charged depreciation on the tax component. 3) The demo vehicles are used for limited time period and replaced earlier of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on motor vehicles except when they are used for making further supply of such motor vehicles. The further supply of such demo vehicles are made after one or two years and constitutes a taxable supply and GST is paid thereon. As GST Act does not prescribe the time within which further supply should be done. Hence, the impugned tax credit should be available. Reliance is placed on Advance Ruling 1) AAR No. GOA/GAAR/07 of 2018-19/4796 dated 26/03/19 by Goa Authority: - input tax credit on the motor vehicle purchased for demonstration purpose can be availed as input tax credit on capital goods and set off against the output tax payable under GST 2) AAR No. KER/10/2018 dated 26/09/18 by Kerala Authority:- Authority held that the input tax paid by a vehicle dealer on the purchase of motor car used for demonstration purpose of the customer can be availed as input tax credit on capital goods and whether the same can be utilised for the payment of output tax payable under this Act. 3) AAR No. GST-ARA-18/2019-20/B-121 dated 26/12/191 by Maharashtra Authority Whether the applicant is entitled to avail input tax credit charged on inward supply of Motor Vehicle which are used for D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other States and has said that if he does not get a favourable ruling he will get placed at a disadvantageous position in comparison to other applicants. 6. His fourth point claims that in the GST Act it is not mandatory to make outward supply of goods within a particular time. All that is needed is that sale should be after the event of purchase has taken place. His sale after two or more years from the date of purchase does not debar him' from claiming input tax credit. AAR has held that a sale of Demo vehicle after one or two years cannot be said that the Demo Vehicle is for further supply. AAR has also held at page 5 para number 7.3 that sale in the subsequent year of Demo Vehicle on which depreciation has been charged to be treated as a sale of used / second-hand vehicle and not sale of a new vehicle. 7. The primary intention of appellant to purchase demo vehicles is to use it for demonstration and trial for the customers. He has, as per his statement, capitalised these purchases of demo vehicles in his books of account and these demo vehicles are used and replaced earlier of following (a) 40,000 kms or above (b) continuation of model. It means that these vehicles h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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