The GST law : The Central Board of Indirect Taxes and Customs said authorised dealers are required to maintain demo vehicles at their sales outlets, which are used to provide trial runs and demonstrate the features of the vehicle to prospective buyers.
These vehicles are purchased by authorised dealers from vehicle manufacturers against tax invoices and are usually shown as capital assets in the account books of authorised dealers.
As per dealership norms, these vehicles may be required to be retained by authorised dealers as demo vehicles for a certain mandatory period and thereafter, may be sold by the READ dealer at the written down price and applicable taxes will be payable at that time.
The CBIC said that the automobile dealers using demonstration vehicles or demo cars to promote sales can claim input tax credit under the GST law.
CBIC said authorised vehicles are used as demo which is promote to sale of motor vehicles as same type and these vehicles are used in the course. Where such vehicles are capitalised in the books of accounts by the authorised dealer, the said vehicles fall within the definition of ‘capital goods’.”
The GST law holds that capital goods are used or are to be used in the course or furtherance of business and hence ITC can be claimed on it subject to other provisions of the law.