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?

[DR.MARIAPPAN GOVINDARAJAN]

In my view GST is payable under reverse charge.

[Padmanathan KV]

THE AGENT IS NOT IMPORTING ANY SERVICE FROM OUTSIDE INDIA, HE IS REIMBURSED THE COST OF REPLACEMENT AND CHARGES FOR THE SERVICE WARRANTY RENDERED TO THE CUSTOMER. THERE WILL BE NO GST LIABILITY EITHER ON RCM/ FORWARD CHARGE BASIS. BUT WILL HAVE TO REVERSE THE IPC AVAILED ON THE SPARES USED FOR THE SERVICE WARRANTY.

AI Summary

GST on cross border warranty payments: characterization as reverse charge or reimbursement determines tax consequence.
Whether warranty charges remitted by a foreign parent to an Indian importer attract GST is contested: one view requires GST under reverse charge, while an alternative view treats the payments as reimbursements for replacement and warranty servicing and not as imported services, yielding no GST charge; both views, however, require reversal of input tax credit on spares used for warranty replacements.