Clarifications on GST for Warranty Replacements and Services
The industry has been facing challenges around the GST taxability of parts, goods, and services replaced during the warranty period. CBIC has now provided clear guidance on various scenarios via Circular No. 195/07/2023 and Circular No. 216/10/2024:
1. Original Equipment Manufacturer (OEM) Warranty Replacements:
No additional GST payable by OEM/distributor on replacement of parts/goods as such or repair services provided during the warranty period if no extra charge is made.
No ITC reversal required by OEM/distributor for replacement of parts/goods as such or repair services as the original supply value includes the cost of these replacements.
2. Distributor Warranty Replacements on Behalf of Manufacturer:
No additional GST payable by distributor on replacement of parts/goods as such/repair services if provided without charging any consideration to customer.
If distributor replaces from own stock or by purchasing through third party and charges the same to manufacturer by way of tax invoice, then the same shall be treated as supply and GST shall be payable on same and manufacturer can claim the ITC.
If distributor replaces from own stock and instead of raising invoice on manufacturer, the manufacturer raises a credit note on distributor then the tax liability shall be adjusted by the manufacturer, provided the distributor has reversed the ITC availed against the parts so replaced.
If distributor raises a requisition to the manufacturer for the part(s)/goods as such to be replaced and manufacturer provides the same without any additional consideration, then no GST is payable. Further no reversal of ITC is required by distributor for replaced parts. The same shall be the case even if the distributor replaces from his own stock and then raises requisition.
3. Repair Services by Distributors to Customer Without any Charge but the Same is Charged to Manufacturer:
GST is payable on repair services charged to the manufacturer, who can claim ITC of the same.
4. Extended Warranty:
If entered at the time of the original supply, it is part of the composite supply and shall be treated supply of goods as the same is principal supply and GST is applicable.
If provided separately by a different entity at the time or after the original supply, it is a separate supply of service, and GST is payable accordingly.
These clarifications aim to streamline the GST implications for warranty-related transactions and ensure compliance and clarity for all stakeholders involved.
