Queryn on gst

[Himansu Sekhar]

1. As per sec. 18(1)c of cgst act, when a registered person ceases to pay tax under sec. 10, he will take credit of capital goods as per rule 40(1)(a). But if the date of invoice is more than one year, when the composition scheme is over, can he take credit?

2.Whether spare parts provided during warranty will attract gst?

3. Credit reversed when goods written off in the existing CCR rules, subsequently used post gst, can he take the credit.

Kindly give reply

Regards

[KASTURI SETHI]

Query-wise reply:-

1. No.

2.Yes

3. No.

[DR.MARIAPPAN GOVINDARAJAN]

I almost endorsed the views of Shri Kasthuri Sethi.

[Himansu Sekhar]

As per the provisions 1 & 2 are correct. But kindly elaborate about q. 2

[MUKUND THAKKAR]

If ITC is taking on spare parts procuring the and same have been supplied during the warranty period you need to reverse the ITC. need not to pay GST.

[KASTURI SETHI]

Warranty period for any product is never free of cost. It is like an agreement between manufacturer and buyer. Invoice bears terms and conditions. So invoice is also contract between the two persons. Since likely cost during warranty period , is already included in the selling price. What type of defect would arise in warranty period , nothing can be said. That may or may not require spares. The defect may or may not require spares, but cost of repair is to be borne by the manufacturer as buyer has paid expected amount in advance at the time of purchase. So repair with or without spares, GST has to be borne by the manufacturer.Hence spare attracts GST.

is never free of cost. The

[MUKUND THAKKAR]

Thanks Sh.kasturiji Sir for explaining in details.

[Himansu Sekhar]

will it come come the category sl.no. 1 , sch. 1: permanent disposal of assets where the credit has been taken

[Himansu Sekhar]

As clarified, the gst will not be paid during supply of goods during warranty period free of cost and no credit will be reversed. I respect their view of experts.

[KASTURI SETHI]

I welcome the difference of opinion as expressed by Sh.Himansu Sekhar, an expert.

Let me further clarify on the basis of practical situation. In pre-GST era, if the cost of free warranty is included in transaction value of the product at the time of clearance from the factory of the manufacturer, it is obvious CE duty has been paid. There is no need to pay CE duty again on the cost of warranty. But practically the cost of free warranty is not included in the transactional value at the time of clearance from the factory. In that situation, CE duty is to be paid on the cost of warranty. It is de facto not free warranty. The dealer collects warranty charges in the price in some guise. It is post manufacturing. Hence it is additional consideration and CE duty is required to be paid.

Analogy is applicable to GST.

AI Summary

Input tax credit: reversal required where spare parts are used for warranty; suppliers bear GST on warranty repairs. On exiting the composition scheme, input tax credit for capital goods is not available if the invoice is older than one year; spare parts supplied during warranty attract GST and any previously claimed ITC on such parts must be reversed when used for warranty obligations; credit reversed under prior write off rules cannot be reclaimed if goods are later used post GST. Warranty costs are regarded as part of the transaction value, and suppliers bear tax on warranty repairs.