Car Dealer allowed ITC Claim on Demo cars: AAR

Car Dealer allowed Input Tax Claim on Demo cars by Advance Ruling

ITC on Demo cars

CA Pratibha Goyal | May 7, 2024 |

Car Dealer allowed ITC Claim on Demo cars: AAR

Car Dealer allowed ITC Claim on Demo cars: AAR

[West Bengal AAR in matter of LANDMARK CARS EAST PRIVATE LIMITED]

Question: Whether the applicant is entitled to claim input tax credit charged and paid on inward supply of car from Mercedes Benz India which are used for demonstration purpose to the potential customer interested in buying Mercedes Benz Car, commonly known as Demo cars?

Answer: The applicant is entitled to claim the input tax credit charged and paid on inward supply of car which are used for demonstration purpose and supplied further after a specified time period.

Question: If the answer to the above is in affirmative, what would be the classification and rate of tax at the time of sale of demo car? And if the answer is negative then what would be the classification and rate of tax at the time of sale of demo cars?

Answer: The vehicle would be classified under Chapter 8702 or 8703, as the case may be and its outward supply would attract same rate of tax of its inward supply subject to the provision of section 14 of the GST Act.

Question: Whether amount received by the applicant from Mercedes Benz India towards reimbursement of Loss on Sale of Demo Carl constitute as supply? If yes, what is the classification and rate of tax of the same under GST?

Answer: The amount received by the applicant from Mercedes Benz India towards reimbursement of  Loss on Sale of Demo Car‖ shall be regarded as consideration received against supply of services of agreeing to tolerate an act (SAC: 9997974) and would be taxable at rate of 18%.

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