Development Charges and GST

[Kaustubh Karandikar]

XYZ is the manufacturer of Product ‘A’ which attracts 12% GST. To manufacture this product, they require Blocks, Punches etc. which they get it done from outside. XYZ recovers this amount of developing the blocks and punches from the customer through tax invoice issued for Product ‘A’ but shows it separately as ‘Development charges’ for making blocks and punches. 1) Can XYZ charge the same GST which is applicable for product ‘A’ in respect of development charges recovered or 2) Need to issue a separate service invoice for development charges and charge the applicable GST?

AI Summary

GST Rate on Development Charges: Include in Product 'A' Invoice for 12% GST or Separate Invoice at 18%? XYZ, a manufacturer of Product 'A' subject to 12% GST, incurs costs for blocks and punches necessary for production. These costs are recovered from customers as 'Development charges' on the invoice for Product 'A'. The discussion revolves around whether XYZ should apply the same GST rate for these charges as for Product 'A' or issue a separate invoice with a different GST rate. Responses indicate that if development charges are included in the same invoice, they attract the GST rate for Product 'A'. If invoiced separately, they are subject to the standard GST rate of 18%.