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

GST on patterns: classification of pattern charges determines whether pattern is taxable separately or amortised into zero-rated casting value.
GST treatment turns on whether patterns are a separate supply or part of the casting supply: separate sale of patterns held in India attracts GST and is not zero-rated; where pattern charges form part of the casting price and castings are exported, include only the amortised pattern cost per unit in the castings' value and treat the castings as zero-rated. Mischaracterising pattern charges as packing charges risks under-valuation and incorrect classification. Contractual terms and ownership determine asset status and tax consequences.