Chargiability of VAT - optional warranty

[madhavvan n]

A Manufacturer sells Vehicle to B – who is its sales Company B- the sales company sells the vehicle to the dealer- C Dealer- C sells the vehicle to end Customer A scheme of optional warranty for a consideration is given by the Sales company B to the customer When customer buys the vehicle from dealer he has option to exercise warranty and he pays the optional warranty amount in favour of B- Sales Company. Dealer-C acts as an agent of B- sales Company. Issue: Whether the optional warranty amount is to be included in sales price for purpose of charge of VAT and by whom whether B-Sales company to charge VAT on this optional warranty on the customerwhich is exercised by the customer on purchase of vehicle from the dealer. in my view the warranty charges even if optional would have to be included when dealer sells to customer since the consideration is flowing in respect of the vehicle to the sales company kindly give your views

[Surender Gupta]

In my preliminary view, the fact need to be ascertained that who is collected the warranty charges i.e. B is collected through C. In that case, the amount of optional warranty shall be included into the value of sale of B. Your view is also solicited.

AI Summary

Optional warranty VAT treatment: warranty consideration payable to seller forms taxable value; seller must charge VAT. Where an optional warranty is paid to the sales company (B) - including if collected through the dealer (C) acting as B's agent - the warranty consideration must be included in the value of B's sale and be subject to VAT; the obligation to include the amount and charge VAT rests with B, and it is necessary to ascertain who actually collects the warranty charges and whether C is acting as agent.