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The circular clarifies the availability of input tax credit on demo vehicles used by authorized dealers for providing trial runs and demonstrating features to potential buyers. It covers two key issues: availability of ITC on demo vehicles u/s 17(5)(a) of the CGST Act, and availability of ITC where demo vehicles are capitalized by dealers. The circular states that demo vehicles promote sale of similar vehicles and are thus used for 'further supply', qualifying for ITC u/s 17(5)(a)(A). However, ITC is not available if vehicles are used for staff transportation. For dealers acting as agents, providing test drives on behalf of manufacturers, ITC is not available as they are not making further supply. The circular also clarifies that capitalization of demo vehicles does not impact ITC availability, subject to conditions like depreciation claims under Income Tax Act. Dealers must pay applicable tax when subsequently selling capitalized demo vehicles.
The circular clarifies the availability of input tax credit on demo vehicles used by authorized dealers for providing trial runs and demonstrating features to potential buyers. It covers two key issues: availability of ITC on demo vehicles u/s 17(5)(a) of the CGST Act, and availability of ITC where demo vehicles are capitalized by dealers. The circular states that demo vehicles promote sale of similar vehicles and are thus used for 'further supply', qualifying for ITC u/s 17(5)(a)(A). However, ITC is not available if vehicles are used for staff transportation. For dealers acting as agents, providing test drives on behalf of manufacturers, ITC is not available as they are not making further supply. The circular also clarifies that capitalization of demo vehicles does not impact ITC availability, subject to conditions like depreciation claims under Income Tax Act. Dealers must pay applicable tax when subsequently selling capitalized demo vehicles.
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