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

Car Dealers: No Need to Pay GST on Warranty Parts; Issue Delivery Challan, Keep Input Tax Credit Intact. A car dealer inquires about handling GST on warranty claims settled via credit notes, specifically whether to issue an invoice with IGST and pay IGST. A respondent refers to a Kerala Authority for Advance Rulings decision, highlighting that no GST is payable on parts supplied under warranty as the initial supply value includes warranty costs. Therefore, the dealer need not reverse input tax credit on replaced parts. Another participant concurs, suggesting issuing goods on a delivery challan without reversing the input tax credit, as the cost of parts is covered in the original material value.