Warranty Charges received from supplier outside India

[Kaustubh Karandikar]

XYZ(India) importing goods from PQR (Japan) which is a parent company. During warranty period, if any defect is found in these goods, PQR is paying the warranty charges to XYZ. Is XYZ liable to pay GST on it? If yes under which provisions?

AI Summary

GST Liability on Warranty Charges: Reverse Charge or Not? Experts Debate Input Tax Credit Reversal for Spare Parts. XYZ, an Indian company, imports goods from its parent company, PQR in Japan. During the warranty period, PQR covers any defect-related charges. The query is whether XYZ must pay GST on these warranty charges. One expert suggests GST is payable under reverse charge. Another expert argues that since XYZ is not importing a service but being reimbursed for warranty services, there is no GST liability under reverse or forward charge. However, XYZ must reverse the Input Tax Credit (IPC) availed on spare parts used for warranty services.