FOC supply to customer

[SARAVANAN RENGACHARY]

Dear Sir,

FOC supply does not attract GST as there is no consideration received.

is there any restriction in availing GST input credit on the components/raw materials consumed in manufacturing such FOC supply.

Saravanan.

[SHIVKUMAR SHARMA]

You are not Eligible for Input tax Credit for Mfg. of goods cleared on FOC Supply..

[SARAVANAN RENGACHARY]

Dear Sir,

is GST applicable on Warranty replacement?.

[SARAVANAN RENGACHARY]

If input is not eligible for FOC supply, is the input is eligible for warranty replacement supply?.

Saravanan.

[SHIVKUMAR SHARMA]

There has to be a consideration for charge GST.Since there is no consideration & spare are free of cost, No GST is to be Charged.

If goods are Supplied for free then you will have to reverse ITC availed on such goods,but you need not to reverse ITC If waranty charges were recovered from Customer,may be even a single Rupee

Your Customer can avail ITC if you have charge GST.

[Rajagopalan Ranganathan]

Sir,

According to Schedule I of CGST Act, 2017

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods-

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

will beACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION.

All other supplies made free of cost are not liable to gst.

[Himansu Sekhar]

There will be no GST on warranty replacements and no ITC reversal. Reproducing the FAQ released by Board:

Question 20: What would be the tax liability on replacement of parts (no consideration is charged from a customer) under a warranty and whether the supplier is required to reverse the input tax credit?

Answer: As parts are provided to the customer without a consideration under warranty, no GST is chargeable on such replacement. The value of supply made earlier includes the charges to be incurred during the warranty period. Therefore, the supplier who has undertaken the warranty replacement is not required to reverse the input tax credit on the parts/components replaced.

[KASTURI SETHI]

Warranty replacement is never free. Tax already/duty already paid at the time of clearance from the factory. When we purchase any goods from a dealer with warranty, cost of component/material is included with duty paid. Hence it is not free supply. No reversal required. Agreed with Sh.Himansu Sekhar Ji.

[Alkesh Jani]

Sir,

Here the first question is whether GST is applicable on Free of Cost (FOC) goods or not? In this scenario the para 2. Schedule I states that

“2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:” So here it is very prominent to note that supply between related person or distinct person, GST is applicable. If we are of the view that as there is no consideration no GST is payable, then there will lot of tax evasion. as commercial quantity or marketability is also not specified in the Act, only supplies. Therefore, even a free sample of lowest quantity, GST is applicable.

Now the second question is how to post the transaction in return and in books of Accounts. My point of view the Invoice may be for Self and Delivery to the receiver of free of cost and GST shall be reflected in the Invoice as well as in books of Accounts. The Invoice may be endorsed as “No ITC available”. This will help to maintain stock and ITC also. I request our experts to please comment and correct me, if mistaken.

[KASTURI SETHI]

If GST paid, ITC can be taken, supply may be to related person.

[Ganeshan Kalyani]

no GST on sample goods supplied. but proportionate input tax credit is required to be reversed .

AI Summary

FOC supply GST treatment: free warranty replacements usually non taxable while ITC reversal depends on supply characterisation. GST on free of cost supplies depends on whether the transfer is characterised as a taxable supply; specified activities are treated as supply even without consideration, making GST and ITC consequences applicable. Warranty replacements provided without charge are generally not taxable because original consideration is treated as covering warranty costs, and suppliers need not reverse ITC on parts replaced under warranty; by contrast, non warranty free supplies that qualify as taxable supplies require ITC reversal or adjustment as per supply characterization.