GST ON PATTERNS

[RV PERUMAL]

Sirs, we are casting manufacturers by Name Kumar alloys, and regularly receiving orders from Anderson Inc, Germany. While releasing purchase order, the buyer mentioned ( value is for example only changing order to order case ) that, casting value ₹ 2 lakhs and pattern cost is ₹ 10000. Then our Kumar Alloys, making the pattern from PHP patterns, Coimbatore and pay from our bank account and received the pattern bill in Kumar Alloys name and availing the ITC paid for the pattern. While sending the castings to Anderson INC, pattern is not returned physically by Kumar Alloys. Since pattern is not available physically, the Customs officials not allowing to mention about pattern in the Bill of Supply, and hence the cost of pattern is adjusted as Packing Charges in the invoice by Kumaran Alloys. This scinerio is happening for the whole year on different supplies. My question is. Is it correct?, Is there any classifications issue in future? Is the pattern is our Asset? Because we are receiving the cost of pattern from the buyer separately! What is our position if the buyer ask the pattern back since they paid cost of pattern already. Kumar Alloys is doing this regularly like this. Please clarify sir.

AI Summary

Kumar Alloys Faces GST Dilemma Over Pattern Costs in Export Contracts; Experts Debate Classification and ITC Claims A casting manufacturer, Kumar Alloys, regularly supplies castings to Anderson Inc, Germany, and includes a pattern cost in the purchase order. The patterns are made by a third-party, PHP Patterns, and Kumar Alloys claims Input Tax Credit (ITC) on them. Customs officials do not allow the pattern cost to be listed separately in the Bill of Supply since the patterns are not physically exported, leading Kumar Alloys to adjust this cost as packing charges. The discussion revolves around whether this practice is correct, the classification of patterns as assets, and the potential GST implications if the buyer requests the pattern back. Experts suggest determining whether the contract includes patterns as a separate item or part of the casting cost to resolve the issue.