GST on FOC Supply

[Kaustubh Karandikar]

XYZ(Manufacturer) supplying goods to customers on payment of GST. Subsequently, goods are supplied on FOC basis, 1) During warranty period if found defective or damaged or 2) After warranty period if found defective, damaged or short supplied. a) Whether XYZ is required to pay GST on goods supplied on FOC basis under both the situations i.e. before and after warranty period? b) How to arrive at the value for FOC supply c) Whether proportionate ITC is required to be reversed if GST is not required to be paid on FOC supply?

AI Summary

No GST on Free of Charge Warranty Replacements; No ITC Reversal Needed According to Case Law and CBIC FAQs. A manufacturer, XYZ, supplies goods on a Free of Charge (FOC) basis if found defective or damaged during or after the warranty period. The discussion seeks clarity on whether GST is applicable on these FOC supplies and if input tax credit (ITC) needs to be reversed. Responses indicate that no GST is chargeable on warranty replacements as the initial supply value includes warranty costs. Therefore, there's no need to reverse ITC on parts replaced under warranty. The discussion references relevant case law and CBIC FAQs to support these conclusions.