New Delhi: Vehicle dealers can claim input tax credit (ITC) under the GST law on vehicles displayed at showrooms for sales promotion, the Central Board of Indirect Taxes and Customs (CBIC) has said.

However, CBIC has clarified that if the dealers use the demo cars for their own purpose in the course of business, they will not get any ITC benefit. Car sales attract 28 per cent GST plus applicable cess. Authorised vehicle dealers are required to display demo vehicles at their showrooms in accordance with dealership norms.

This is necessary to show potential customers the features of the vehicle and to give them an opportunity to test drive it. These vehicles are purchased by authorised dealers from vehicle manufacturing companies against tax invoices and are usually shown as capital assets in the books of authorised dealers.

These vehicles are kept by vehicle dealers as demo vehicles for a certain mandatory period. They can then sell them at the written price and applicable taxes will be payable at that time.