ITC of Credit Notes under GST against warranty

[Kuldeep Kapoor]

Sir,

We are car dealer selling cars . we are getting Warranty Claims by way of Credit Notes and i.e. ₹ 1000 + 18% as IGST .

Whether we have to issue Invoice with IGST and Pay IGST Please Clarify

[KASTURI SETHI]

In your query, detailed facts are known to me . So I would like to bring to your notice the following decision of AAR, Kerala Question No.(iii) & (iv) & their replies are worth reading and relevant for you.

2018 (18) G.S.T.L. 834 (A.A.R. - GST) = 2018 (11) TMI 282 - AUTHORITY FOR ADVANCE RULINGS, KERALA IN RE : SARASWATHI METAL WORKS

[KASTURI SETHI]

Pl.read the first line of my reply as ,"Detailed facts are NOT known to me."

[KASTURI SETHI]

In continuation of case law mentioned above :

(iii) The supply of parts under warranty being without consideration, no GST is payable. The value of supply made earlier includes the charges to be incurred during the warranty period. Therefore, the applicant who undertakes the warranty replacement is not required to reverse the input tax credit on the parts/components replaced.

(iv) The supplier/manufacturer is eligible to avail the credit of higher input tax paid on purchase of raw materials, even though the manufactured products are taxable at lesser tax rate.

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[GAWESH NARULA]

No need to reverse the ITC, You can issue the goods on deliveryt challan , departement is in this view, the company has already taken the cost of parts with origna material value .

As per my view no need to reverse the ITC.

AI Summary

Input tax credit on warranty replacements preserved; no GST or ITC reversal required where parts are supplied without consideration.
Where parts supplied under warranty are provided without consideration, those supplies are not taxable and no GST is payable; the original sale value is treated as including warranty replacement charges, so the provider of warranty replacements need not reverse input tax credit on replaced parts. Suppliers who paid higher input tax on inputs can still claim that credit even if the final product is taxed at a lower rate. Issuing parts under a delivery challan for warranty work is consistent with departmental practice supporting non-reversal of ITC.