GST on Free of Cost Replacement for failed Spares

[RameshC Behera]

Hi,

We are a Subsidiary of an MNC . Our Parents company supplies Capital Goods to its customers in India. When there is any breakdown capital goods, supplied to said customers, our Parent company send us the spares free of cost paying duty, GST, Freight and clearing charges with an instruction to supply these parts as a replacement of the spares free of cost to the customer.

Please let us know the GST implication on the Free of Cost Supply made by us.

AI Summary

Free supply under warranty: ordinarily not subject to GST, but claimed input tax credit must be reversed.
Import of spares from a foreign parent attracts customs duty and IGST on import, and the IGST paid can be utilised as input tax credit against subsequent GST liabilities. Free-of-cost supply of replacement parts as a warranty obligation does not constitute a taxable supply, but if input tax credit was claimed on those goods or related inputs, the taxpayer must reverse the proportionate input tax credit; no reversal is required where no credit was taken.