ITC reversal on re - work

[Kaustubh Karandikar]

During the period 2019 - 20, Re – Work carried out on goods received back from the Customers and after re – work it was sent back to customers under a Delivery Challan without payment of GST as it was within the warranty period. Whether proportionate input tax credit is required to be reversed on this?

AI Summary

No ITC reversal needed for warranty rework on goods; repair services to OEMs during warranty are GST applicable. A discussion on a forum addressed whether input tax credit (ITC) needs to be reversed for re-work on goods returned under warranty. The consensus among participants, supported by a recent circular, was that no ITC reversal is required. The cost of re-work or repair during the warranty period is included in the original supply price, thus not necessitating GST payment or ITC reversal. The forum also clarified that repair services provided by third parties to Original Equipment Manufacturers (OEMs) during the warranty period are subject to GST. Participants thanked each other for the insights shared.