Clarification on availability of ITC in respect of warranty replacement of parts and repair services during warranty period :
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. Clarification 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.
Issue 1: Replacement of parts and repair services during warranty period without consideration
- No GST is chargeable on replacement parts and repair services provided during the warranty period when no separate consideration is charged from the customer.
- GST is payable if any additional consideration is charged for replacement parts or services.
Issue 2: Reversal of Input Tax Credit (ITC)
- Warranty supplies are not considered exempt supply.
- Manufacturers don’t need to reverse ITC on replacement parts or repair services provided during the warranty period without charging any consideration.
Issue 3: Distributor providing warranty services
- No GST is payable by the distributor when providing replacement parts and repair services during warranty without charging any consideration.
- GST is payable by the distributor if any additional consideration is charged for replacement parts or services.
Issue 4: Distributor supplying parts to the manufacturer for warranty purposes
- When distributor using his stock or by purchasing from a third party and charges the consideration GST is payable by the distributor when supplying parts to the manufacturer for warranty replacements, and the manufacturer can avail ITC.
- When distributor raises a requisition to the manufacture for the parts to be replaced by him under warranty and manufacture then provides that part No GST is payable.
Issue 5: Repair services provided by the distributor: GST is payable by the distributor on repair services provided during warranty to the manufacturer, and manufacture would be entitled to avail ITC.
Issue 6: Extended Warranty
- GST is payable when the customer enters into an extended warranty agreement at the time of original supply. PRINCIPAL SUPPLY BEING SUPPLY OF GOODS and GST would be payable accordingly.
- GST is payable if the customer enters into an extended warranty agreement after the original supply. Taxability will be depending on the nature of the contract i.e., whether the extended warranty is only for goods or for services or for composite supply involving goods and services.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any.
