GST & ITC on warranty

 𝐂𝐥𝐚𝐫𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐨𝐧 𝐆𝐒𝐓 & 𝐈𝐓𝐂 𝐟𝐨𝐫 𝐖𝐚𝐫𝐫𝐚𝐧𝐭𝐲 𝐑𝐞𝐩𝐥𝐚𝐜𝐞𝐦𝐞𝐧𝐭𝐬 — 𝐂𝐢𝐫𝐜𝐮𝐥𝐚𝐫 𝟏𝟗𝟓/𝟎𝟕/𝟐𝟎𝟐𝟑-𝐆𝐒𝐓

The CBIC had issued a Circular No. 195/07/2023-GST dated 17th July 2023, resolving the long-standing confusion surrounding 𝐰𝐚𝐫𝐫𝐚𝐧𝐭𝐲-𝐛𝐚𝐬𝐞𝐝 𝐫𝐞𝐩𝐥𝐚𝐜𝐞𝐦𝐞𝐧𝐭𝐬 𝐚𝐧𝐝 𝐫𝐞𝐩𝐚𝐢𝐫 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬 under GST. 𝐊𝐞𝐲 𝐏𝐨𝐢𝐧𝐭𝐬: 1.    𝐍𝐨 𝐆𝐒𝐓 𝐨𝐧 𝐅𝐫𝐞𝐞 𝐑𝐞𝐩𝐥𝐚𝐜𝐞𝐦𝐞𝐧𝐭𝐬/𝐑𝐞𝐩𝐚𝐢𝐫𝐬 𝐝𝐮𝐫𝐢𝐧𝐠 𝐖𝐚𝐫𝐫𝐚𝐧𝐭𝐲 If a manufacturer provides parts or repair services free of cost during the warranty period, 𝐧𝐨 𝐚𝐝𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐆𝐒𝐓 is payable. GST is already discharged on the original supply, which includes such costs. 𝐍𝐨 𝐑𝐞𝐯𝐞𝐫𝐬𝐚𝐥 𝐨𝐟 𝐈𝐓𝐂- Since these warranty services are part of the original taxable supply, 𝐈𝐓𝐂 𝐧𝐞𝐞𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐫𝐞𝐯𝐞𝐫𝐬𝐞𝐝 by the manufacturer. 2.    𝐃𝐢𝐬𝐭𝐫𝐢𝐛𝐮𝐭𝐨𝐫𝐬 𝐨𝐧 𝐁𝐞𝐡𝐚𝐥𝐟 𝐨𝐟 𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐞𝐫𝐬 If a distributor uses their own parts and 𝐢𝐧𝐯𝐨𝐢𝐜𝐞𝐬 𝐭𝐡𝐞 𝐦𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐞𝐫, GST is applicable, and ITC can be claimed by the manufacturer. If the 𝐦𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐞𝐫 𝐬𝐮𝐩𝐩𝐥𝐢𝐞𝐬 𝐩𝐚𝐫𝐭𝐬 to the distributor free of cost for customer replacement, no GST is applicable and no ITC reversal is required. If the distributor replaces the part out of the supply already made by him from the manufacturer, the manufacturer issued a 𝐜𝐫𝐞𝐝𝐢𝐭 𝐧𝐨𝐭𝐞, the distributor must 𝐫𝐞𝐯𝐞𝐫𝐬𝐞 𝐈𝐓𝐂 on the replaced part. 3.    𝐑𝐞𝐩𝐚𝐢𝐫 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬 𝐛𝐲 𝐃𝐢𝐬𝐭𝐫𝐢𝐛𝐮𝐭𝐨𝐫𝐬 without any consideration from customer but charges the repair charges from the manufacturer If the distributor charges the manufacturer (not the customer), GST is applicable, and the manufacturer can avail ITC. 4.    𝐄𝐱𝐭𝐞𝐧𝐝𝐞𝐝 𝐖𝐚𝐫𝐫𝐚𝐧𝐭𝐲 — 𝐆𝐒𝐓 𝐓𝐫𝐞𝐚𝐭𝐦𝐞𝐧𝐭 If taken 𝐚𝐭 𝐭𝐡𝐞 𝐭𝐢𝐦𝐞 𝐨𝐟 𝐨𝐫𝐢𝐠𝐢𝐧𝐚𝐥 𝐬𝐮𝐩𝐩𝐥𝐲, it is part of the composite supply—GST applies accordingly. If taken 𝐚𝐟𝐭𝐞𝐫 𝐨𝐫𝐢𝐠𝐢𝐧𝐚𝐥 𝐬𝐮𝐩𝐩𝐥𝐲, it is a separate contract, and GST is applicable depending on the nature (goods/services/composite).