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TMI BlogClarification on availability of input tax credit in respect of demo vehiclesX X X X Extracts X X X X X X X X Extracts X X X X ..... d by the authorised dealers from the vehicle manufacturers against tax invoices and are typically reflected as capital assets in books of account of the authorized dealers. As per dealership norms, these vehicles may be required to be held by the authorized dealers as demo vehicle for certain mandatory period and may, thereafter, be sold by the dealer at a written down value and applicable tax is payable at that point of time. 2. Reference has been received to issue clarification regarding availability of input tax credit in respect of demo vehicles on the following issues: i. 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 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of outward taxable supplies being made using the said motor vehicle) from the restriction on availment of input tax credit in respect of the specified motor vehicles i.e. motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver). The taxable supplies, permitted for the purpose of being excluded from the blockage of input tax credit as per provisions of clause (a) of section 17(5) of the WBGST Act, being further supply of such motor vehicles, transportation of passengers and imparting training on driving such motor vehicles. 4.3 As demo vehicles are used by authorized dealers to provide trial run and to demonstrate features of the vehicle to potential buyers, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, as demo vehicles promote sale of similar type of motor vehicles, they can be considered to be used by the dealer for making further supply of such motor vehicles‟. Accordingly, input tax credit in respect of demo vehicles is not blocked under clause (a) of section 17(5) of the WBGST Act, as it is excluded from such blockage in terms of sub-clause (A) of the said clause. 4.5 There may be some cases where motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) are used by an authorized dealer for purposes other than for making further supply of such motor vehicles, say for transportation of its staff employees/ management etc. In such cases, the same ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) of clause (a) of section 17(5) of the WBGST Act and therefore, input tax credit on the same would not be available to the said dealer. 5. Availability of input tax credit on demo vehicles in cases where such vehicles are capitalized in the books of account by the authorized dealers. 5.1 As per provisions of section 16(1) of the WBGST Act, every registered taxpayer is entitled to take input tax credit charged on any supply of goods and services made to him, where such goods or services are used in the course or furtherance of business of such person, subject to such conditions and restrictions as may be prescribed and in the manner which is specified. 5.2 Further, goods has been defined in section 2(52) of the WBGST Act , as, goods means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on demo vehicles is not affected by way of capitalization of such vehicles in the books of account of the authorized dealers, subject to other provisions of the Act. 5.5 However, it is to be mentioned that in case of capitalization of demo vehicles, availability of input tax credit would be subject to provisions of section 16(3) of the WBGST Act, which provides that where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the Income-Tax Act, 1961, the input tax credit on the said tax component shall not be allowed. It is further mentioned that in case demo vehicle, which is capitalized, is subsequently sold by the authorized dealer, the authorized dealer shall ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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