Input tax credit— Section 16 of CGST Act— In the instant case, the applicant is an authorized dealer of Hyundai Motor India Limited for supply of different ranges of motor vehicles and also carries on business activities as an authorized service station.

It is submitted by the applicant that he purchases vehicles against tax invoices which are reflected in his books of accounts as capital assets and are used as demo cars for providing trial run to the customers to make them understand the features of the vehicles.

Question sought for advance ruling is as follows—

Whether GST liability on sale of vehicle, spares, labour can be done by utilizing the input tax credit on purchase of demo vehicle, other expenses like repairs & maintenance, insurance etc.

The applicant maintains the stock of the demo vehicles for a specified period of time and thereafter supplies the same, may be at a price lower than the purchase value of the said vehicle. However, the provisions of the GST Act nowhere specifies that input tax credit shall not be available in respect of any outward supplies which is made at a price lower than its procurement value. Further, restriction imposed under section 17(5)(a)(A) shouldn’t be applied on the ground that the supplies have been made after a certain period of time since there is no time limit prescribed in this regard for making such further supplies.

Held that— The applicant is eligible to avail input tax credit on purchases of demo vehicles which can be set off against output tax payable under GST.