Amortised cost of tool- inclusion in the value for GST

[Nash Industries I Pvt Ltd]

Erstwhile Excise law the cost of the amortised value of tool is to be added to arrive at the transaction value as per Section 4 read with Valuation rules.

Now under Section 15 of the CGST Act read with Rule 27 of the CGST Rules, it appears that the amortised cost ot the tool to be included in the value for GST.

GOI Twitter reply to my tweet also says Yes to be included.The tweets of GOI have a disclaimer

However, the customers mostly the MNC and auto giants are of the view that under the GST , the amortised cost of the tool is not includible to arrive at the value for GST.

Seek your views.

Regards

S.Ramaswamy

[DR.MARIAPPAN GOVINDARAJAN]

In my view, it is includible.

[Rajagopalan Ranganathan]

Sir,

According to Section 15 (c) of CGST Act, 2017 "incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services.

Therefore, if the supplier procure the tool as instructed by the recipient, then amortized value of the tool is includible in the transaction value. if the tool is supplied free of cost by the recipient then we can argue that since the supplier has not incurred any expenditure in respect of the tool supplied free of cost amortized value of the tool need not be included in the transaction value. However the issue will get settled only through litigation.

[CSSANJAY MALHOTRA]

Endorsed the views of Sh. Rajgopalan as is area of dispute.

[Nash Industries I Pvt Ltd]

The supplier himself manufactures the tool as per the design and specification of the customer. The tool so manufactured were used in the manufacture of components for the customer. Therefore, the amortised cost of the tool was added to the value of the component when the components were sold to the customer.

In the erstwhile law , for the tools exemption under 67/95 CE was claimed and the Local VAT was charged to the customer (even if the customer was outside the state- as the sale of the tool takes place within the state).

The question is the GST paid on the amortised cost of the tool is allowed as ITC to the customer, then why the customer to insist on non inclusion of the amortised cost.

This will diffuse litigation is my view.

Regards

S.Ramaswamy

[KASTURI SETHI]

There is legal as well as logical substance in the point of Sh.S.Ramaswamy, Sir.

"The question is the GST paid on the amortised cost of the tool is allowed as ITC to the customer, then why the customer to insist on non inclusion of the amortised cost."

On the basis of above ground we can say that the amortised cost is includible in the transaction cost for the purpose of payment of correct GST. So it is better to pay and avoid interest and penalty.

[Senguttuvan Kuppusamy]

With respects due to yourself, the payablity doesn't arise from availaibility of ITC. Does the law contemplates while tool is given free of cost requiring the dealer to produce the components using those moulds with a condition that all that he produces can be supplied only to him, then why the dealer amortise the mould cost

AI Summary

Inclusion of amortised tool cost in GST valuation affects transaction value and input tax credit entitlement for supplier recoveries. Whether amortised tool cost charged or recovered by a supplier must be included in the transaction value for GST depends on whether it constitutes an incidental expense or amount charged in respect of the supply under Section 15 and valuation rules; inclusion is supported where the supplier recovers the cost or procures the tool at the recipient's instruction, whereas tools supplied free by the recipient raise a dispute over inclusion, with practical effects on input tax credit and compliance risk.