Input tax credit— Section 17(5) of CGST Act— The present appeal has been filed against the order of Authority for Advance Ruling.

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).

the Ruling given by the Madhya Pradesh Advance Ruling Authority is reasonable, and appropriate. Section 17 (5)(a) prescribes the condition in which input tax credit shall not be available on 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 maki g the following taxable supplies:-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicle;

This authority drive the conclusion that the demo vehicles used for demonstration and for offering trial facility to customers, are not covered in above exceptions.

Held that— This authority agree with the ruling of Madhya Pradesh Authority for Advance Ruling and in our opinion Appellant is not entitled to avail input tax credit on inward supply of motor vehicles which are used for demonstration purpose as such vehicles do not qualify the exceptions given in clause (A),(B) and (C) of section 17(5)(a) of GST Act, 2017.