TaxTMI 
TaxTMI 
2020 (11) TMI 1066
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....to the similar provisions under the MPGST Act and vice-versa. At places we may refer it as GST Act. BRIEF FACTS OF THE CASE The appellant- M/s Khatwani Sales and Services LLP is registered with GSTIN No. 23AAUFK1834E1ZE and is an authorised dealer for Kia Motors Corporation for supply of motor vehicles, spares and servicing in Jabalpur, Madhya Pradesh. QUESTION RAISED BEFORE AUTHORITY FOR ADVANCE RULING (AAR) Question raised before AAR, are as under: - Whether the applicant is entitled to avail input tax credit charged on inward supply of Motor Vehicles which are used for demonstration purpose in the course of business of supply of motor vehicles as input tax credit on capital goods and whether the same can be utilised for the payment of output tax payable under this Act? RULING PRONOUNCED BY AUTHOURITY FOR ADVANCE RULING (AAR) It is Ruled that the applicant is not eligible for input tax credit on Demo Vehicles purchased for the furtherance of business, in view of barring provisions of clause (a) of sub-section (5) of section 17 of GST Act, 2017 as they are not covered by any of the exception given in clause A, B or C of section 17(5) (a). QUESTIONS RA....
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.... on his own account including when such goods or services or both are used in the course or furtherance of business. e) Goods or services or both on which tax has been paid under section 10 i.e. Composition Scheme. f) Goods or services or both received by a non-resident taxable person except on goods imported by him; g) Goods or services or both used for personal consumption; h) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; i) Any tax paid in accordance with the provisions of sections 74 (Tax not / short paid due to fraud etc), 129 (Detention, seizure and release of goods and conveyance in transit) and 130 (confiscation of goods or conveyance and levy of penalty). Detailed Analysis of Section 17 (5) Block Credit:- Interpretation of Statutes The natural presumption of the section is that to block the input tax credit of the goods and services or both of the items which are commonly used as personal goods and services like wise motor vehicles, food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, life insurance and health insur....
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....st pace due to competition in the market, it marks as a regular business feature for the appellant. 2) Further, the appellant purchases Demo Vehicle from Kia Motors Corporation against tax invoice after paying tax and capitalizes the same in his books of accounts and has not charged depreciation on the tax component. 3) The demo vehicles are used for limited time period and replaced earlier of following: A) 40000 kms or above B) Continuation of model and then sold at Written Down Value after paying applicable taxes. GROUNDS OF APPEAL Ground 1: Motor vehicles in the nature of demo cars should not be hit by the Provisions of blocked credit u/s 17(5) of the CGST Act According to Section 2(19) of GST Act, "every registered person shall be entitled to take input tax credit charged on supply of goods or services or both which are used or intended to be used in the course or furtherance of his business." Further, as per Section 2(19) of CGST Act, capital goods means "goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of bus....
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....rity held that the input tax paid by a vehicle dealer on the purchase of motor car used for demonstration purpose of the customer can be availed as input tax credit on capital goods and whether the same can be utilised for the payment of output tax payable under this Act. 3) AAR No. GST-ARA-18/2019-20/B-121 dated 26/12/191 by Maharashtra Authority Whether the applicant is entitled to avail input tax credit charged on inward supply of Motor Vehicle which are used for Demonstration purpose in the course of business of supply of motor Vehicles as input tax credit on capital goods' and whether the same can be utilised for the payment of output tax payable under this Act :- Answer is Affirmative PERSONAL HEARING The appellant was called for personal hearing on 12.10.2020 and was deferred for 29.10.2020. On 29.10.2020 the appellant was heard through Shri Deepak Asrani, Chartered Accountant. After hearing the appellant has expressed his satisfaction through a letter and asked for decision. DISCUSSION AND FINDINGS 1. We have carefully gone through the submissions made by the appellant in his appeal application as well as the submission made at the time of ....
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....of Demo Vehicle on which depreciation has been charged to be treated as a sale of used / second-hand vehicle and not sale of a new vehicle. 7. The primary intention of appellant to purchase demo vehicles is to use it for demonstration and trial for the customers. He has, as per his statement, capitalised these purchases of demo vehicles in his books of account and these demo vehicles are used and replaced earlier of following (a) 40,000 kms or above (b) continuation of model. It means that these vehicles have very specific object to serve and after that, these are subsequently supplied by way of sale as old, used and second hand vehicle. It is worthy to mention here that there is no question of cascading effect since the issue is already clear in light of notification no. 8/2018-Central Tax (rate) dated 25/01/2018, Explanation no. (i) of this notification stated that, "in case of a registered person who has claimed depreciation under section 32 of the Income-Tax Act, 1961 (43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods o....