<p><span>In September 2024, the Ministry of Finance, Government of India, issued Circular No. 231/25/2024-GST. This circular provides clarification on the availability of input tax credit (ITC) in respect of demo vehicles maintained by authorized motor vehicle dealers. The clarifications aim to ensure uniformity in the implementation of GST provisions across various field formations.</span></p><p><span><strong>Key Highlights:</strong></span></p><ol start="1"><li><span><strong>Input Tax Credit on Demo Vehicles:</strong> The circular clarifies that input tax credit is available for demo vehicles used by authorized dealers for providing trial runs and demonstrations, as these vehicles are considered to be used for making further supply of similar motor vehicles.</span></li><li><span><strong>Restriction Exceptions:</strong> Demo vehicles are excluded from the restriction on availment of ITC as per clause (a) of section 17(5) of the CGST Act when they are used for making taxable supplies such as further supply of motor vehicles.</span></li><li><span><strong>Capitalized Demo Vehicles:</strong> Input tax credit on demo vehicles remains available even if such vehicles are capitalized in the dealer's books of account, provided the vehicles are used in the course or furtherance of business.</span></li><li><span><strong>Non-Eligible ITC:</strong> In cases where demo vehicles are used for purposes other than for making further supply of motor vehicles, such as for staff transportation, the input tax credit is not available.</span></li><li><span><strong>Dealer as Agent:</strong> If a dealer acts as an agent or service provider for the vehicle manufacturer, providing demo vehicle test drives as part of marketing services, the input tax credit is not available.</span></li><li><span><strong>Depreciation Impact:</strong> If depreciation is claimed on the tax component of the cost of demo vehicles under the Income-tax Act, 1961, the input tax credit is not allowed.</span></li><li><span><strong>Implementation Consistency:</strong> Field formations are advised to ensure consistency in implementing these clarifications, and trade notices are recommended to publicize the contents of the circular.</span> <a href="https://cms.plasament.com/storage/cir-cgst-231-2024.pdf">cir-cgst-231-2024</a><br> </li></ol>