Page 40 - GSTL_21st May 2020_Vol 36_Part 3

J66 GST LAW TIMES [ Vol. 36

SUPPLY OF DEMO CARS — RATE OF GST &
ITC AVAILABILITY
By
Ashish Mittal
GST CONSULTANT

Background
Goods & Services Tax (in short “GST”) intro-
duced in year 2017 enacted similar provisions for sale of
old and new car. The law has imposed heavy tax burden
on all cars which also pay cess over and above the highest
slab rate of 28%. Later in beginning of year 2018 the statute were relaxed with
regards to used car.
In this compilation an attempt is made to study the different aspects for
Supply of Car for Demonstration purpose - regarding the applicability of various
provisions, rate of tax etc.
Facts of the case
(I) Mr. X is a manufacturer, who manufactures car for supply to the
dealers. He also supplied vehicles of different models for demon-
stration or test drive purpose to its car dealers say Mr. Y.
(II) Mr. Y is an authorised car dealer, dealing in first hand cars, had ac-
quired a car for demonstration or test drive and had applied for reg-
istration of the aforesaid car.
(III) Mr. Y later on intends to sell the car to one of his customer who is
willing to purchase the same car used for demonstration or test
drive, post test drive.
Query :
(1) The aforesaid car being registered with the authorities in name of
Mr. Y for demonstration or test drive, which later on intended to be
sold to a prospective customer. Whether such sale by Mr. Y tanta-
mount to sale of old car and used vehicle? (i.e. its classification and taxabil-
ity)
(2) Whether Mr. Y can apply concessional rate as mentioned in Notification
No. 8/2018-C.T. (Rate), dated 25 January, 2018, which has provided a
uniform rates of 12%/18% on used and old vehicles. (i.e. rate of tax
applicable post reduction of rate on used vehicles and ITC related
provisions).
Analysis and reply to query
Having a glimpse over the facts of the case, Mr. Y is basically an author-
ised car dealer who by virtue of its agency, sells cars to the ultimate customer.
Further in general trade practice as well as for the sake of increasing the custom-
er base, the dealer usually has one car of each model for demonstration and trial
run purpose for the customers. The query rose above can be analysed and ac-
cordingly following interpretations can be made in this respect :

GST LAW TIMES  21st May 2020  40