Regarding Input Tax Credit

[Prateek Agrawal]

As I am registered dealer under GST Act. and having business of motor vehicles . For demo purpose I issued invoice in the name of firm i.e.self . whether the input credit is available or not . The same is showing in books of account under the hade fixed assests .

[KASTURI SETHI]

ITC can be taken .

[Ganeshan Kalyani]

Raising an invoice on demo basis will not make you eligible to take credit. This is my view.

[YAGAY and SUN]

We endorse the views of the experts.

Please check the point No. 3 of the appended link.

GST CONCERNS OF AUTOMOBILE DEALERS

 

[KASTURI SETHI]

Dear Querist,

Pl. go through the following extracts before taking final decision:

EXTRACT FROM FAQS DATED 30.817 Q.No.21

Under GST, how to send demonstration equipment and instruments to customers or branch offices with in India on returnable basis? - No sale is involved.

As the goods are sent on returnable basis and no transfer of title is involved, it is not a supply of goods. If some element of service is involved, the same will be a taxable supply. The goods may be sent on delivery

In terms of Section 16 of the CGST Act, 2017 ITC is allowed on goods and services which are inputs for the supplier and hence Motor Vehicle is eligible goods for taking ITC. But Section 17 (5) of CGST Act, 2017 imposes some restrictions or conditions which are as under :-

_____________________ no ITC shall be allowed in respect of motor vehicle and other conveyances except when they are used-
(i) for making the following taxable supplies, namely:-
(A) further supply of such vehicles or conveyances; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods.

[KASTURI SETHI]

Procedural lapse cannot override your substantive right of ITC. If you fight legally you would get benefit. Your substantive right cannot forfeited just because you have issued invoice instead of delivery challan for demo purpose.

If you pay tax by bona fide mistake, can you not claim refund ?

So, situation being entirely different, you can get GST paid back either by way of refund or ITC. It is adjustment of wrongly paid tax.

[BalKrishan Rakheja]

I think there is no bar to take ITC as the Demo vehicle is being used for furtherance of his business. In fact if the vehicle is being used by the dealer for Demo purpose then there was no need to issue invoice for self. This is my view.

AI Summary

Input tax credit available on demonstration vehicles when used for business, subject to specified use exceptions.
Availability of input tax credit on motor vehicles depends on permitted uses: credit is allowed where the vehicle serves qualifying taxable activities such as onward supply, passenger transport, training, or goods transport. Documentary or procedural lapses (for example issuing an invoice instead of a delivery challan) do not automatically forfeit the substantive right to ITC; taxes paid by bona fide mistake may be rectified by refund or adjustment, and credit may be taken where the demo vehicle is used in furtherance of the dealer's business subject to use-based exceptions and compliance.