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Taxpayer is entitled to avail ITC charged on inword supply of motor vehicle and can be utilized for payment of output tax.

Input Tax Credit The applicant, seeking an advance ruling in respect of the following question.

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 Vehicle as input tax credit on capital goods and whether the same can be utilised for payment of output tax payable under this Act.

Held that :- In the subject case, the applicant has submitted that every model of demo cars is used by them for demonstration only for a limited period i.e. every two years or 40,000 Kms whichever is earlier (the documents submitted by the applicant on 14.11.2019 reveal that the two year period as being the minimum period is not followed by them. Their Demo Vehicles are sold after two years also) and thereafter, the said vehicles are sold after paying the applicable taxes on sale value at that point of time. Since the applicant will be making further supplies of the Demo vehicles, and there is no time limit prescribed in the GST Act for making such further supplies, we are of the opinion that they will be eligible to avail ITC in the subject case.

The applicant has also queried whether the ITC availed by them on capital goods can be utilized for payment of output tax payable under this Act.

The manner of utilization of ITC is provided as per provisions of Section 49 of the CGST Act. Section 18 of the CGST Act deals with availability of credit in special circumstances. As per Section 18(6) of the CGST Act, when there is a supply of capital goods on which ITC has been taken, as in the subject case then the applicant shall pay an amount equal to the ITC taken on the said Demo Vehicles reduced by such percentage points as may be prescribed or the tax on the transaction value of such Demo Vehicles, whichever is higher. — Chowgule Industries Private Limited, In Re… [2019] 19 TAXLOK.COM 109 (AAR-Maharashtra)

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