Auto dealers can claim ITC on demo cars used for promoting sales: CBIC

Automobile dealers using demonstration vehicles or demo cars for promoting sales can claim input tax credit (ITC) under the GST law, the CBIC has said.

However, no ITC would be available if demo cars are used by dealers for their own purpose during the course of the business.

In a circular, the Central Board of Indirect Taxes and Customs (CBIC) said authorised dealers are required to maintain demo vehicles at their sales outlet as per dealership norms which are used for providing trial runs and for demonstrating features of the vehicle to the potential buyers.

These vehicles are purchased by the authorised dealers from the vehicle manufacturers against tax invoices and are typically reflected as capital assets in books of account of the authorized dealers.

As per dealership norms, these vehicles may be required to be held by the authorized dealers as demo vehicle for certain mandatory period and may, thereafter, be sold by the dealer at a written down value and applicable tax is ..