No ITC Allowed on Demo Vehicles Retained by Car Dealers for Workshop Use | AAR

Case Details: Authority for Advance Rulings, Telangana Sai Service (P.) Ltd., In re - [2023] 153 taxmann.com 231 (AAR-TELANGANA)

Judiciary and Counsel Details

• • S.V. Kasi Visweswara Rao & Sahil Inamdar, Member

Facts of the Case

The applicant-automobile dealer required demo vehicles which would be registered and used for demonstration and test drive for a period of two years or 40,000 kms whichever would be earlier. It filed an application for advance ruling to determine whether ITC would be allowed to applicant or not.

AAR Held

The Authority for Advance Ruling noted that as per Section 17(5) of the CGST Act, 2017, ITC would not be allowed on purchase of motor vehicles for transportation of persons unless purchased for further supply of such motor vehicles.

Therefore, it was held that if applicant would make further supply of demo vehicle, it would be eligible for ITC but in case the applicant would retain vehicle for its workshop as replacement vehicle as mentioned in sales policy of car manufacturer, it shall not be eligible for ITC as there would be no further supply.