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Input tax credit on warranty replacements not reversed; free warranty repairs not taxable unless extra consideration charged. The value of the original supply by a manufacturer includes anticipated warranty replacement and repair costs; where replacements or repairs are provided during warranty without separate consideration, no additional GST is chargeable and no reversal of input tax credit is required. If additional consideration is charged to the customer, GST applies to that consideration. Distributor-manufacturer arrangements are taxable or not depending on whether the distributor issues a taxable invoice to the manufacturer, the manufacturer supplies parts to the distributor without consideration, or a credit note and ITC reversal mechanism is involved. Repair services billed by the distributor to the manufacturer are taxable, and extended warranties sold at sale are composite supply while those sold later are separate taxable contracts.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Input tax credit on warranty replacements not reversed; free warranty repairs not taxable unless extra consideration charged.
The value of the original supply by a manufacturer includes anticipated warranty replacement and repair costs; where replacements or repairs are provided during warranty without separate consideration, no additional GST is chargeable and no reversal of input tax credit is required. If additional consideration is charged to the customer, GST applies to that consideration. Distributor-manufacturer arrangements are taxable or not depending on whether the distributor issues a taxable invoice to the manufacturer, the manufacturer supplies parts to the distributor without consideration, or a credit note and ITC reversal mechanism is involved. Repair services billed by the distributor to the manufacturer are taxable, and extended warranties sold at sale are composite supply while those sold later are separate taxable contracts.
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