Clarification On Availability Of Input Tax Credit In Respect Of Demo Vehicles

Last updated: 25 September 2024

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This circular provides clarification on the availability of input tax credit (ITC) for demo vehicles used by authorised motor vehicle dealers. Demo vehicles are maintained for test drives and demonstrations to potential buyers. Dealers purchase these vehicles against tax invoices and record them as capital assets. While dealers may be required to hold these vehicles for a mandatory period, they can be sold later at a written-down value, with applicable tax due at that point.

Circular No. 231/25/2024-GST F. No. CBIC-20001/6/2024-GSTGovernment of India Ministry of FinanceDepartment of Revenue Central Board of Indirect Taxes and CustomsGST Policy Wing*** New Delhi, dated the 10th September, 2024 To, The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/Commissioners of Central Tax (All)The Principal Directors General/ Directors General (All) Madam/Sir, Subject: Clarification on availability of input tax credit in respect of demo vehicle

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FAQ :

Demo vehicles are vehicles that authorised motor vehicle dealers must keep at their sales outlets as per dealership norms. They are used to provide trial runs and demonstrate vehicle features to potential buyers.

Authorised dealers purchase demo vehicles from vehicle manufacturers against tax invoices.

Demo vehicles are typically reflected as capital assets in the books of account of the authorised dealers.

Yes, as per dealership norms, demo vehicles may be sold by the dealer at a written-down value after a mandatory holding period.

Applicable tax is payable at the point when the demo vehicle is sold by the dealer at a written-down value.

Notification No : 231/25/2024-GST
Source : https://taxinformation.cbic.gov.in/view-pdf/1003230/ENG/Circulars

Attached File : 322600_11350_circular_no_231.pdf

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