Madhya Pradesh High Court: Demo Car Entry by Kia Motors in the State Subject to GST

Madhya Pradesh High Court: Demo Car Entry by Kia Motors in the State Subject to GST

The High Court of Madhya Pradesh has ruled against M/s Kia Motors India Private Ltd. (petitioner), affirming that suppliers have a legal obligation to notify the authorities regarding the movement of goods exceeding the value of ₹50,000. This obligation, as stipulated in Rule 138(1)(ii) of the Goods and Services Tax Rules (GST Rules), applies even if the reasons for the movement are unrelated to supply. Suppliers must electronically file Form-A GST, EWB-01, on the common portal, providing all the required information as per the rule.

Based on the petitioner's failure to comply with the requirement, the Court concluded that the entry of the demonstration car into the State of Madhya Pradesh without providing the mandatory information subjects it to the Goods and Services Tax (GST).

The petitioner's primary argument was centred around the contention that the demo vehicle transported within the State of Madhya Pradesh was not intended for sale. Consequently, they maintained that the transaction should not be subject to GST. To support their claim, the petitioner invoked Section 7 of the GST Act, specifically highlighting the definition of the term 'supply'. They argued that since there was no financial consideration involved due to the absence of a sale or purchase, bringing the demo vehicle into the State of Madhya Pradesh should not trigger the imposition of GST.

In contrast, the counsel representing the State put forth the argument that according to the provisions outlined in Section 129 of the GST Act and Rule 138 of the GST Rules, the movement of goods exceeding the value of ₹50,000 remains subject to GST, irrespective of whether they fall under the definition of supply or not.

The High Court rejected the writ petition, determining that there were no errors in the order of the Joint Commissioner, State Tax, Bhopal Division. The Court found that the Joint Commissioner's decision to reduce the tax levied from ₹8,40,000 to ₹5,40,000, as well as the corresponding penalty from ₹8,40,000 to ₹5,40,000, was justifiable. However, the Court did set aside the imposition of Cess amounting to ₹6,60,000 and the corresponding penalty of ₹6,60,000.