The Punjab and Haryana High Court while quashing the ruling given by Appellate Authority of Advance Ruling (AAAR) held that BMW is entitled to Input Tax Credit (ITC) on demo vehicles.
The bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth has observed that Circular No.231/25-HGST/2024/GST-II (CBIC Circular No.231/25/2024- GST, dated 11.09.2024), dated 13th September 2024 discussed the 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 persons in terms of clause (a) of section 17(5) of Haryana Goods & Services Tax Act, 2017.
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Circular No.231/25/2024-GST
A clarification of availability of Input Tax Credit in respect of demo vehicles, has been issued vide Circular No.231/25/2024-GST (F.NO.CBIC-20001/6/2024-GST], dated 10.09.2024.
The circular deals with the availability of input tax credit on demo vehicles in cases where such vehicles are capitalised in the books of account by the authorised dealers.
As per the circular the availability of input tax credit on demo vehicles is not affected by way of capitalization of such vehicles in the books of account of the authorised dealers, subject to other provisions of the Act.
In case of capitalization of demo vehicles, availability of input tax credit would be subject to provisions of section 16(3) of CGST 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 capitalised, is subsequently sold by the authorised dealer, the authorised dealer shall have to pay an amount or tax as per provisions of section 18(6) of CGST Act read with rule 44(6) of the Central Goods and Service Tax Rules, 2017.
Conclusion
The court held that the observations of not giving benefit of Input Tax Credit to vehicles, which have been initially used as demo vehicles, is accordingly, set-aside in view of the extension of grant of availability of Input Tax Credit with respect to the demo vehicles, as clarified by the circulars.
Case Details
Case Title: M/s BMW India Pvt. Ltd. Versus The Appellate Authority for Advance Ruling for the State of Haryana and another
Case No.: CWP-7235-2022
Date: 12.11.2024
Counsel For Petitioner: Priyanka Rathi
Counsel For Respondent: Mamta Singla Talwar
