The Haryana Appellate Authority of Advance Ruling (AAAR) has held that Input Tax Credit (ITC) is not permissible in respect of demo cars/vehicles.

Haryana AAAR observed that in the first demonstration run, demo cars lose the character of the new motor vehicle, and the demo vehicles are sold akin to second-hand goods, which are different from new vehicles and accordingly treated differently under GST law, so the demo car is not an input.

“The vehicles received by the Appellant under stock transfer have never been received with the intent for ‘further supply of such motor vehicles as such’. Hence, the ITC on these vehicles, cannot be allowed, the AAAR specified.” Additionally, on the same rationale, the input credit of the services of repair/insurance/maintenance used in respect of said vehicles with seating capacity up to 13 persons, cannot be allowed.