GST Input Tax Credit  Not Allowed to BMW On Demo Car Or Vehicle: AAAR

[15 March 2022] The Haryana Appellate Authority of Advance Ruling (AAAR) bench consisting of Amit Kumar Aggarwal and Anil Kumar Jain ruled that the Input Tax Credit (ITC) is not allowable on demo cars/vehicles.
BMW/Appellant has been registered in GST at Gurugram as a State administered taxpayer for running a training centre for the training of Engineers and Marketing professionals etc. They get BMW-branded vehicles made in the Chennai plant as inter-state stock transfers on which IGST and Compensation Cess have been paid, and use these vehicles for ‘a very limited period of about 12 months’.
BMW had sought an advance ruling on the issue of whether the unit of BMW is entitled to avail the Input Tax Credit (ITC) of IGST and Compensation Cess paid on receipt of cars (on stock transfer basis) for use in relation to business activities and onwards supply to dealers after use for a limited period of time.
The AAAR ruled that in the very first demonstration run, demo cars lose the character of the new motor vehicle, and demo vehicles are sold akin to second-hand goods, which are different from new vehicles and accordingly treated differently under GST law, so the demo car is not an input.
“The BMW vehicles received by the Appellant under stock transfer have never been received with the intent to simply ‘further supply of such motor vehicles/’sell as such’. The Input Tax Credit on these vehicles, therefore, cannot be allowed,” the AAAR added.