AMORTISATION REQUIREMENT UNDER GST

[CABIJENDERKUMAR BANSAL]

X(USA) has signed contract with Y(India) for production of goods & export to X.Mould was to be provided by X as per contract. X has given advance of ₹ 50 L to Y for purchase of mould in India & to be retained by Y for production. Y purchased mould from Z(India) & availed GST input on this. Should Y raise export invoice of mould to X(though physically to be retained by Y)? or Y shall add amortised cost of mould in export invoices of goods to X? is input eligible on purchase of mould by Y from z.

[Rajagopalan Ranganathan]

Sir ,

It depends on the invoice raised by Z whether the invoice is raise in the name of Y or in the name of X but to be delivered to Y. If supply of mould by Z is to Y then Y can avail the credit and on exporting the mould to X on completion of production and supply programme he can claim the refund of ITC of gst paid on the mould. Under GST law amortization of mould cost is not comtyemplated.

[YAGAY andSUN]

Pl. check point no. 1 of th Circular No. 47/21/2018-GST dtd. 08th June in matter.

[SANTHANA KRISHNAN]

Sir,

in the said notification, i could not make any difference between 1.2 & 1.3.

can anyone explain to me with nice examples? thanks & regards

J Ramamurthy

[Nash Industries I Pvt Ltd]

The most confusing circular is the circular dated 8th June 2018 regarding moulds and dies. It has raised more doubts rather than clarity.

[Nash Industries I Pvt Ltd]

1.1 - situation where the tools are moved from the OEM to the component manufacturer. Not a supply. No tax payable. No reversal of credit.

1.2 Further clarifies point 1.1 that in such case no need to add the amortised value to the component.

1.3 situation (bill to ship to) - retained by the component manufacturer - no movement of tool from OEM to component manufacturer - Credit to be reversed. Amortised cost to be included in the value.

Had the clarification at point 1.2 be after 1.3, then the issue would have been clear. But that was not the intention.

Regards

S.Ramaswamy

AI Summary

Amortisation of mould cost under GST: invoicing and physical movement determine ITC entitlement and value treatment. Treatment of GST on a domestically purchased mould for production for an overseas principal depends on invoicing and physical movement. If the domestic supplier invoices the manufacturer, the manufacturer can claim input tax credit, but export treatment varies: when tools move from the principal to the manufacturer no supply or credit reversal arises and no amortised value need be added; where billing is to the principal but the manufacturer retains the mould, credit must be reversed and the amortised mould cost included in the value of supplied goods.