ITC Availment in Dies/pattern/fixtures by the customer

[Deepak Kumar]

I am a manufacturer of iron casting. My customer has placed an order for specified product, for that pattern is required. My customer has sanctioned 20 lakh budget for that pattern and asked me only to get it ready. I have got the pattern manufactured from 3rd vendor in Rs 5 lakh. The vendor has invoiced me for Rs 5 lakh, I took the credit on 5 lakh. Subsequently, I have raised the sale invoice for that pattern to my Customer for Rs 20 lakh and charged GST on it. Though it's a fact that I will not be sending that pattern physically, because I will manufacturer the product from this patter as desired by my customer, for that I need the pattern with me. Now my queries:

1. As pattern will always be with me only, can my customer take ITC on it? Though I have raised a sale invoice to my customer, he only is the actual owner, but since pattern is in my possession, can he avail ITC? Have my customer ever used this patter for furtherance of his business?

2. If my customer is in different state, can I raise the IGST invoice? Whether it will be right in respect of Section 10(c) and 11 of IGST Act?

Please guide.

AI Summary

Iron Casting Manufacturer Seeks Clarity on ITC Eligibility for Customer-Funded Pattern and IGST Invoicing Across States A manufacturer of iron casting is seeking guidance on Input Tax Credit (ITC) related to a pattern required by a customer for a product order. The customer, who funded the pattern, is not in possession of it as it remains with the manufacturer for production purposes. The manufacturer has invoiced the customer, charging GST, and queries whether the customer can claim ITC despite not physically possessing the pattern. Additionally, the manufacturer seeks advice on raising an IGST invoice if the customer is in a different state. Responses suggest compliance with Section 16[2][b] and reference relevant circulars for clarity on ITC eligibility.