TaxTMI 
TaxTMI 
2024 (5) TMI 37
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.... Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression "GST Act" would mean the CGST Act and the WBGST Act both. 1.2 The applicant is an authorised agent of Mercedes Benz for supply of cars, related spare parts and is also engaged in providing various services such as repairs, warranties, roadside assistance and servicing. It is responsible for facilitating the sales of Mercedes-Benz passenger vehicles, including the Mercedes-Benz EQ (Electric Cars). As submitted, the Applicant shall function as a self-employed commercial agent with the responsibility of brokering the sales of vehicles on behalf of MB INDIA. The primary objective is to facilitat....
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....senting and working on behalf of MB INDIA in vehicle sales transactions. In recognition of the services provided, the applicant is entitled to receive a commission. 2.3 The applicant has entered with an Authorised Agent Agreement with MB INDIA on August 30, 2021. According to paragraph 7.5 of the said agreement, MB INDIA will make available the authorised agent with a sufficient number of Demo vehicles, which are essential for demonstrating the Contract Goods to prospective customers. The said para has further been amended by virtue of which the applicant may buy vehicles on its own account to carry out demonstration of Contract Goods. 2.4 The terms and conditions related to the above provision may be summarized as under: • Upon the request of the authorised agent, MB INDIA may sell the Demo vehicles to the authorised agent at a discount as per the Demo vehicles Guideline issued by MB INDIA from time to time. • The rights of title to and ownership of the Demo vehicles shall vest with the authorised agent in its own capacity and not in its capacity as an Agent. • The authorised agent shall use the Demo vehicles only for the purpose of pro....
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....T ON PURCHASE OF DEMO CAR: 2.6 The applicant, in respect of admissibility of input tax credit on inward supply of demo car from MB INDIA has contended as follows: 2.6.1 These demo cars are purchased from MB INDIA at a discounted price, with the GST liability duly paid during these transactions. Upon purchase, the applicant records demo cars as purchase of inventory (Stock in Trade) in its books of accounts. When these cars are sold, they are removed from the inventory and entire sale proceeds are accounted for in Sales account. 2.6.2 Presently, the applicant, while filing returns in FORM GSTR-3B, claims the ITC on purchase of Demo cars and subsequently reverses the same in the same month in temporary ITC reversal. In other words, when the applicant purchases a demo car, it avails the ITC in column 4(A)(5) of GSTR-3B and then immediately reverses the same in 4B(2) column of GSTR-3B due to legal confusion in the minds of the applicant. 2.6.3 Further when demo car is eventually sold, the applicant considers the demo car as old and used motor vehicle and therefore follows the margin scheme specified in Notification No. 8/2018-Central Tax (Rate) dated 25.01.2018. 2.6.4 Th....
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....ere is no dispute regarding their eligibility for ITC, including for demo cars used in the process of selling cars and subsequently sold. • As per the demo car policy, it is mandatory for the applicant to purchase demo cars, use them as demonstration / test drive vehicles and sell them after they have been used for a specified mileage or periods, as referred in the policy. Failure to comply with this requirement could disrupt the applicant's business. • As per section 17(5)(a)(A), input tax credit on motor vehicles shall not be allowed except when they are used for further supply of such motor vehicles. The term 'such" refers to the things or goods referred earlier in the sentence, in this case the motor vehicle. Therefore, 'such' in "further supply of such motor vehicles" refers to the specific motor vehicle that has been acquired and encompasses all vehicles acquired for the purpose of resale, including demo vehicles. As per the Merriam Webster dictionary - Such can mean something similar as indicated earlier. Collins Dictionary defines the word 'Such' with following description: You use such to refer back to the thing or person that....
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.... meeting the due claims against the evacuees or their properties. It is thus clear that what can be directed to be transferred to the compensation pool by the Government under S. 14(1)(b) is the "cash balances" and not the total cash deposits with the Custodian. • In the case of Pt. Chet Ram Vashist v. Municipal Corpn. of Delhi, (1995) 1 SCC 47: AIR 1995 SC 430 [Date of decision: 26-10-1994] the Hon'ble court was considering interpretation of the term "Such condition" in Delhi Municipal Corporation Act, 1957 (66 of 1951) - S. 313 - Delhi (Control of Building Operations) Ordinance, 1955 - Cl. s para 3(iv): The expression, 'such conditions' has to be understood so as to advance the objective of the provision and the purpose for which it has been enacted. The Corporation has been given the right to examine that the layout plan is not contrary to any provision of the Act or the rules framed by it. But the power cannot be construed to mean that the Corporation in the exercise of placing restrictions or imposing conditions before sanctioning a layout plan can also claim that it shall be sanctioned only if the owner surrenders a portion of the land and transf....
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.....T.L. 375 and BMW INDIA Pvt. Ltd., 2022 (63) G.S.T.L. 107, the hon'ble appellate authority for advance ruling, Haryana have taken a contrary view. However, the common factor in all the cases was that the applicant was capitalizing the cars in its books of accounts and claiming depreciation. Whereas, in the case of the applicant, the cars are booked as stock in trade and therefore above rulings cannot be applied to the facts of the instant case. Further, in case of AAAR of BMW, the difference was that they were registered as a State administered taxpayer for running a training center for the training of Engineers and Marketing professionals etc. and hence, the same can also not be applied to the instant case. 2.9 The applicant further draws attention to the provisions of the Motor Vehicle Act and the rules made there under and summarizes such provisions as under: a. A dealer is required to take a trade certificate for operating the business of car dealer. b. Car dealer is exempt from registering a car; he can run the car with him under the TC plate. c. He can use the TC plate car for reasonable demonstration purposes. d. Word 'Reasonable' is no....
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....ue a credit note for the same. The detailed provisions for this are discussed below: 2.10.5 In the present case, the initial invoicing for the demo car is based on the agreed pricing. Subsequently, following the guidelines in MB INDIA's demo car policy, the applicant is required to sell the demo car in the market after a specified holding period of 3 to 6 months. This sale can result in either a profit or a loss. If a loss occurs during the sale, MB INDIA commits to reimburse this loss. Conversely, if a profit is realized, MB INDIA retains the right to recover this profit. 2.10.6 It is essential to understand that in both situations - the reimbursement of losses and the recovery of profits - these financial transactions are inherently linked to the sale of the demo car. Hence, rather than treating these transactions as separate and potentially taxable supplies of services under the category of 'tolerating an act', MB INDIA should issue specific Credit Notes in the case of a loss incurred during the demo car sale and Debit Notes when a profit is realized in alignment with the provisions of Section 34 of the GST Act. 3. Submission of the Revenue The concerned offi....
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....x credit under certain scenarios meaning thereby input tax credit may be denied even in cases where sub-section (1) of section 16 entitles a registered person to take input tax credit. One of such restriction as specified in clause (a) of sub-section (5) of section 17 limits the scope of input tax credit with respect to motor vehicles. The same is reproduced below for reference: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles;" 4.4 In other words, input tax credit on motor vehicles used for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), can be availed only when such motor vehicles a....
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.... the expression 'further supply of such vehicles' relates to the vehicle only that was purchased. In our considered opinion, the fact that the condition of a demo vehicle at the time of its further supply has undergone some deterioration does not detract from the reality that the vehicle when supplied by the applicant has ceased to be such vehicle that was purchased. The demo vehicles are purchased all along for further supply with the condition that they will be kept for a specific period of time. We therefore hold that restriction of input tax credit as imposed in section 17(5)(a)(A) of the GST Act is not applicable on purchase of demo vehicles which are supplied by the applicant after the specified time for providing test drive facility. 4.7 We now come to the next issue which is related to classification and rate of tax at the time of sale of demo car. We find that Chapter 87 of the CUSTOMS TARIFF ACT, 1975 deals with 'vehicles other than railway or tramway rolling-stock, and parts and accessories thereof'. Further, Chapter 8702 covers 'motor vehicles for the transport of ten or more persons, including the driver'. Furthermore, Chapter 8703 covers 'motor cars and other motor....
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....ces in para 5 (e) of Schedule II of the GST Act. Therefore, where one person, pursuant to an agreement, agrees to an obligation to tolerate an act, such would be treated as a supply of services under the GST Act. The Tax Research Unit, Department of Revenue, Ministry of Finance vide Circular No. 178/10/2022-GST dated 03.08.2022 has clarified that 'Service of agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act is nothing but a contractual agreement. A contract to do something or to abstain from doing something cannot be said to have taken place unless there are two parties, one of which expressly or impliedly agrees to do or abstain from doing something and the other agrees to pay consideration to the first party for doing or abstaining from such an act. There must be a necessary and sufficient nexus between the supply (i.e. agreement to do or to abstain from doing something) and the consideration.' The said circular further clarifies that 'one of the parties to such agreement/contract (the first party) must be under a contractual obligation to either (a) refrain from an act, or (b) to tolerate an act or a situation or (c) to do an....
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....ice Tax & Central Excise, Rourkela has observed that 'A distinction needs to be drawn between a consideration under a contract and the compensation or damages under a contract. The compensation-either liquidated or unliquidated cannot be equated with the consideration. While consideration is a result of execution of the contract, the damages are a result of frustration of the contract.' The Hon'ble Tribunal further observed as follows: "The question of tolerating something and receiving a compensation for such tolerance pre-supposes that: a) the person had a choice to tolerate or not; b) the person chose to tolerate; c) such tolerance was for a consideration as per an agreement (written or otherwise) to tolerate; d) the tolerance was a taxable service." 4.14 In the case at hand, the applicant has entered into an agreement with MB INDIA with a specific condition towards 'Demo Car Loss Sharing" knowing very well that it may suffer a loss at the time of selling of demo vehicle since the vehicle would have undergone some deterioration while providing test drive facility to the prospective buyers. In other words, MB INDIA enters into th....