Outward supply in relation to a taxable person means the supply of goods and services or both whether by sales, barter, exchange, license, rental, lease, disposal, or any other mode being made or agreed to be made by such person in the course of the furtherance of the business, as defined by section 2(83) of the CGST Act.

According to section 7(1) of the CGST Act, supply comprises all types of supply of goods or services or both, including the sale, transfer, barter, exchange, license, rental, lease, and disposal made, or promised to be made, for a consideration by a person in the course of the business.

IMPACT OF GST ON USED DEMO CARS:

A display vehicle is a vehicle that is utilised by every dealer in the automobile industry. These vehicles are well-maintained and are typically used to demonstrate products to potential clients in order to increase sales. In today’s market, using a demo vehicle is a commercial requirement for every dealer, as the test drive and numerous other illustrations assist the prospective buyer in making the best selection possible.

After a certain amount of time has passed, these demo vehicles are usually sold as used items.

The demo car can thus be classified as either a ‘capital good’ or an ‘input good.’

“Capital goods” are products whose worth is capitalized in the books of account of the person claiming the input tax credit and which are utilized or intended to be used in the conduct or furtherance of business, according to section 2(19) of the CGST Act, 2017.

According to section 2 (59) of the CGST Act of 2017, “input” refers to any products other than capital goods that a supplier uses or intends to use in the course or furtherance of business.

DEMO PRODUCTS GET AN INPUT TAX CREDIT:

Every registered person is eligible to obtain credit for input tax paid on any supply of products or services (or both) used or planned to be utilized in the course or furtherance of his business, according to the CGST Act.

ITC will not be available in respect of motor vehicles and other conveyances, except when such motor vehicles or other conveyances are supplied further, or used for transportation of passengers, or for giving training on driving, flying, or navigating such vehicles or conveyances, or when they are used for transportation of goods, as stated in section 17(5) of the Act

ITC on demo cars is available under the CGST Act because demo vehicles, such as a demo car, are used to promote the supply of such vehicles, as well as to provide training on driving and the various features and functions available in the vehicle. As a result, input tax credit can be claimed on such demo vehicles.

Provided, however, that many Advance Rulings have been issued in order to present a clearer picture on this subject, all of which support the idea that demo cars are capital goods eligible for ITC:

The Advance Ruling Authority of Goa held in the case of Chowgule Industries that capital goods used in the course of business are eligible for the input tax credit, provided that ITC on the motor vehicle purchased as a demonstration product can be used as an input tax credit on the capital goods and offset against the output tax payable under the GST.

As a result, the acquisition of the demo cars can be classified as capital goods that are used in the operation of the firm and thus qualify for an input tax credit.

via- taxreturnwala

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