Circular, 2023

Text

Reproduced from the document India Code holds for this instrument. The Gazette prints Hindi and English side by side and this is the English; the Department's own PDF remains the authority.

Office of the Commissioner, State Tax, Uttar Pradesh (GST Section) Letter No. GST/2023-24/ é§ /State Tax ' Lucknow: Dated: 0__}, August, 2023 To, All Zonal Additional Commissioner Grade -1, Additional Commissioner Grade -2 (S.I.B.) State Tax, Uttar Pradesh.

Subject: Clarification on availability of ITC in respect of warranty replacement of parts and repair services during warranty period.

Representations have been received from trade and industry that as a common trade practice, the original equipment manufacturers/suppliers offer warranty for the goods/ s supplied by them. During the warranty period, replacement goods/services are supplied to customers free of charge and as such no separate consideration is charged and received at the time of replacement. It has been represented that suitable clarification may be issued in the matter as unnccessary litigation is being caused due to contrary interpretations by the investigation wings and field formations in respect of GST liability as well as liability to reverse ITC against such supplies of replacement of parts and repair services during the warranty period without any consideration from the customers.

2. The matter has been examined. In order to ensure uniformity in the implementation of the provisions of the law across the field formations, the Commissioner, in exercise of its powers conferred under section 168 of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as the UPGST Act), hereby clarifies as follows: | 1. | There are cases where the | The value of original supply of goods (provided | | original cquipment | along with warranty) by the manufacturer to the | manufacturer offers warranty | customer includes the likely cost of replacement of | for the goods supplied by him | parts and / or repair services to be incurred during | to the customer and provides | the warranty period, on which tax would have | - | replacement of parts and/ or | already been paid at the time of original supply of repair services to the | goods.

| customer during the warranty | As such, where the manufacturer provides period, without separately | replacement of parts and/ or repair services to the charging any consideration at | customer during the warranty period, without the time of such replacement/ | separately charging any consideration at the time of | repair services | Whether GST would be | payable on such replacement | of parts or supply of repair | services, without any i consideration from the | customer, as part of warranty? [ Whether in such cases, the | manufacturer is required to reverse the input tax credit in respect of such replacement of parts or supply of repair services as part of warranty, in respect additional | of which no ! consideration is | charged from the customer? Whether would be payable on replacement of | parts and/ or repair services | provided by a distributor without any consideration from the customer, as part of warranty on behalf of the manufacturer? In the above scenario where | the distributor provides replacement of parts to the | customer as part of warranty on behalf of the manufacturer, whether any supply s [ 'such Vrgbl:cxcém;:;i] repair services, no further GST is chargeable on such replacement of parts and/ or repair service during warranty period.

However, if any additional consideration is charged by the manufacturer from the customer, cither for replacement of any part or for any service, then GST will be payable on such supply with respect to such additional consideration.

| In such cases, the value of original supply of goods (provided along with warranty) by the manufacturer to the customer includes the likely cost of replacement of parts and/ or repair services to be incurred during the warranty period.

Therefore, these supplies cannot be considered as exempt supply and accordingly, the manufacturer, who provides replacement of parts and/ or repair services to the customer during the warranty period, is not required to reverse the input tax There may be company provides replacement of parts and/ or repair services to the customer as part of warranty on behalf of the manufacturer and no separate consideration is charged by such distributor in respect of the said replacement and/ or repair services from the customer.

In such cases, as no consideration is being charged by the distributor from the customer, no GST would be payable by the distributor on the said activity of providing replacement of parts and/ or repair services to the customer.

However, if any additional consideration is charged by the distributor from the customer, either for replacement of any part or for any service, then GST will be payable on such supply with respect to such additional consideration.

Y;)irillhz:ré “r}xay be cases whete the distributor | replaces the part(s) to the customer under warranty cither by using his stock or by purchasing from a third party and charges the consideration for the part(s) so replaced from the manufacturer, by issuance of a tax invoice, for the said supply made Page 2 of 4 d 1 involved between the | distributor and the manufacturer and whether the distributor would be required to reverse the input tax credit in respect of such | replacement of parts? by him to the manufacturer. In such a case, GST would be payable by the distributor on the said supply by him to the manufacturer and the manufacturer would be entitled to avail the input tax credit of the same, subject to other conditions of UPGST Act. In such case, no reversal of input tax credit by the distributor is required in respect of the same.

(b) There may be cases where the distributor raises a requisition to the manufacturer for the part(s) to be replaced by him under warranty and the manufacturer then provides the said part(s) to the distributor for the purpose of such replacement to the customer as part of warranty.

In such a case, where the manufacturer is providing such part(s) to the distributor for replacement to the customer during the warranty period, without separately charging any consideration at the time of such replacement, no GST is payable on such replacement of parts by the manufacturer. Further, no reversal of ITC is required to be made by the manufacturer in respect of the parts so replaced by the distributor under warranty.

(c) There may be cases where the distributor replaces the part(s) to the customer under warranty out of the supply already received by him from the manufacturer and the manufacturer issues a credit note in respect of the parts so replaced subject to provisions of sub-section (2) of section 34 of the UPGST Act. Accordingly, the tax liability may be adjusted by the manufacturer, subject to the condition that the said distributor has reversed the ITC availed against the parts so replaced.

provides repair service, in addition to replacement of parts or otherwise, to the customer without any consideration, as part of wartanty, on behalf of the manufacturer but charges the manufacturer for such repair services either by way of Where the distributor | In such scenario, there is a supply of service by the distributor and the manufacturer is the recipient of such supply of repair services in accordance with the provisions of sub-clause (a) of clause (93) to section 2 of the UPGST Act, 2017.

Hence, GST would be payable on such provision of service by the distributor to the manufacturer and the manufacturer would be entitled to avail the input tax credit of the same, subject to other conditions of UPGST Act.

r*—‘r'issue of tax invoice or a debit T | note, whether GST would be ‘payable on such activity by i the distributor?

6. ‘fio;etimes companies | (a) If a customer enters in to an*agreement of ‘provide offers of Extended | extended warranty with the manufacturer at the “ warranty to the customers time of original supply, then the consideration for ‘ which can be availed at the | such extended warranty becomes part of the value time of original supply or just | of the composite supply, the principal supply being before the expiry of the | the supply of goods, and GST would be payable standard warranty period. | accordingly.

Whether GST would be ‘ payable in both the cases?

(b) However, in case where a consumer enters into an agreement of extended warranty at any time ‘ after the original supply, then the same is a | separate contract and GST would be payable by the | service provider, whether manufacturer or the | distributor or any third party, depending on the ‘ nature of the contract (i.e. whether the extended ‘ warranty is only for goods or for services or for L4 \ composite supply involving goods and services) |

3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

4. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.

By Order, el (Ministhy S.) Commissioner, State Tax, U.P.

Copy To:

1. Joint Commissioner (I.T.), State Tax HQ, Lucknow for uploading the Circular on the Departmental Website.

State Tax HQ, Lucknow.

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Provisions this circular answers to

Read out of the instrument itself: an enabling provision is one it says it was made under, which is the power it rests on. The rest it names without resting on.

Other instruments under the same Act

All of the The Uttar Pradesh Goods and Services Tax Act, 2017