No ITC for Vehicles Received under Stock Transfer unless for further Supply or Sale.

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 No ITC for Vehicles Received under Stock Transfer for Specified Business Activities unless for further Supply or Sale.

The Haryana Appellate Authority for Advance Ruling ( AAAR ) has held that ITC is not allowed for vehicles received under stock transfer for specified business activities unless for further supply or sale.


The Applicant M/s BMW India Pvt. Ltd. Gurugram, which is registered in GST at Gurugram as a State-administered taxpayer for running a training center for the training of Engineers and Marketing professionals etc. 

They get BMW branded vehicles made in Chennai plant as inter-state stock transfer on which IGST and compensation cess has been paid, and use these vehicles for ‘a very limited period of about 12 months, as Training fleet, Press fleet, Marketing fleet, Sales fleet, Visitor cars and Personally Assigned Vehicle. 

The appellant applied before AAR for clarifying whether the Applicant unit is entitled to avail ITC of IGST and Compensation Cess paid on receipt of cars on stock transfer basis for use in relation to specified business activities and thereafter onwards supply to dealers after use by the Applicant unit for a limited period of time.

These vehicles are eventually supplied as old and used vehicles in terms of Notification No.08/2018-C.T. and GST is paid on such supply at a concessional rate as applicable on the old and used Motor Vehicles under the Notification. 

The Applicant has specifically mentioned that they are not seeking relief in respect of 2 categories of Vehicles i.e. Visitor cars and Personally Assigned Vehicles. 

The AAR has held that the Applicant is not entitled to avail input tax credit on motor vehicles put to use as per their submissions. 

Aggrieved by the order of AAR the applicant approached AAAR and submitted that ITC is admissible generally on all the goods which fall under the definition of Inputs. 

Inputs have been defined under the CGST Act 2017 in Section 2(59) as “input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business”.

 Further submitted that the Capital Goods have been defined under the Act in Section 2(19) as, “Capital goods mean goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business”.

 The Appellant has submitted that they are capitalizing the Motor Vehicles subjected to the mentioned usage. Thus, apparently, ITC should be admissible on these vehicles, as ‘capital goods. 

The Coram of AAAR held that *none of the uses to which the BMW Vehicles are put to, fits into the uses which find mention in sub-Section 17(5). 

The vehicles under question are not meant for “further supply of such motor vehicles’ i.e ‘further supply as such”, but are first put to the mentioned uses. 

These are disposed of after prolonged use, which may even not restrict to 12 months as mentioned by the Appellant. 

If the argument of the party is allowed then in that case all the motor vehicles, irrespective of the nature of Supply will be eligible for ITC across the industries. 

It will no longer be a restricted clause for Car Dealers but will be an open clause for all the trade and industries to avail the ITC on all the Vehicles purchased by them. This has never been the intent of the Legislation”. 

It was further held that “as regards to the Applicant’s contention that these vehicles are sold after 12 months ITC may be allowed as Input, it was observed that in the very first demonstration run demo car loses the character of the new motor vehicle and demo vehicles is sold akin to second-hand goods and which is different from new Vehicle and accordingly treated differently under GST law, so the demo car is not an input.

 So it was held that 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’. Input Tax Credit on these vehicles, thus, cannot be allowed”. 

Quite an interesting decision.

SRIVATSAN.R.

NACIN, Chennai


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