The Madhya Pradesh Authority of Advance Ruling (AAR) held that no Input Tax Credit (ITC) is available on demo vehicles available in furtherance of business.
The applicant, M/s Khatwani Sale and Service LLP is an authorised dealer of KIA for sales & services of vehicles. The Applicant has purchased the vehicles from the supplier against tax invoices after paying tax and capitalizes the demo vehicles in the books of accounts.
The applicant has sought the advance ruling on the issue whether Input tax credit on the Demo vehicle purchased can be availed as the same will be capitalized in books.
The Applicant has submitted that the firm will not claim depreciation on the tax component of Demo Vehicles which are capitalized in the books of accounts.
The AAR found that not charging depreciation on the tax component is as per other relevant provisions of the GST Act. But that can not affect the applicability of provisions of Section 17(5)(a) of GST Act according to which the applicant is not eligible for Input tax credit on Demo Vehicles.
The coram consisting of Manoj Kumar Choubey and Virendra Kumar Jain ruled that the applicant is not eligible for Input Tax Credit on Demo vehicles purchased for furtherance of business in view of barring provisions of clause (a) of sub-section (5) of Section 17 of GST Act, 2017 as they are not covered by any of the exceptions given in clause (A), (B) or (C) of Section 17(5) (a) i.e. for further supply of such vehicle, for transportation of passengers and for imparting training for driving respectively.
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