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Maruti Dealer eligible to obtain Input Tax Credit on Purchase and Use of Demo Vehicles: AAR

Facts of the case: The applicant is an authorised dealer for Maruti Suzuki India Ltd. It deals in sale of motor vehicles and spares and for servicing.

The dealer purchases motor vehicle for demo and provides to customers for trial run.

Issue involved:

whether ITC on the motor vehicle purchased for demonstration purpose can be availed as a credit on Capital goods and set off against output tax payable under GST.

The question was raised to AAR as per Section 97 of CGST Act, 2017.

 Points to be considered:

  • The applicant has purchased the demo vehicles and the supplier issues the tax invoices and pay the tax on such invoices.
  • AAR observed the demo vehicles are provided to customers for trial runs which is necessary for the promotion of the motor vehicles as a part of marketing.
  • The applicant capitalizes the purchase of such vehicles in the books of accounts.
  • It is held that such capital goods are used in the course or furtherance of the business.

Conclusion: As per section 16 and 17 of CGST Act, 2017 there is a condition of claiming Input tax credit that the goods should be used in the course or furtherance of the business, Applicant is eligible to claim ITC and can be set off against output tax payable under GST.

Author: Niranjan Reddy

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