The Government of Tripura on July 19, 2023, issued a clarification on the availability of ITC in respect of warranty replacement of parts and repair services during the warranty period.
The following clarification has been issued:
• There are cases where the original equipment manufacturer offers a warranty for the goods supplied by him to the customer and provides replacement of parts and/ or repair services to the customer during the warranty period, without separately charging any consideration at the time of such replacement/ repair services. Whether GST would be payable on such replacement of parts or supply of repair services, without any consideration from the customer, as part of the warranty?
The value of the 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, on which tax would have already been paid at the time of original supply of goods.
As such, where the manufacturer provides replacement of parts and/ or repair services to the customer during the warranty period, without separately charging any consideration at the time of such replacement/ repair services, no further GST is chargeable on such replacement of parts and/ or repair service during the warranty period. However, if any additional consideration is charged by the manufacturer from the customer, either for the replacement of any part or for any service, then GST will be payable on such supply with respect to such additional consideration.
• 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 the warranty, in respect of which no additional consideration is charged from the customer?
In such cases, the value of the 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 supplies 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 credit in respect of the said replacement parts or on the repair services provided.
• Whether GST would be payable on the replacement of parts and/ or repair services provided by a distributor without any consideration from the customer, as part of the warranty on behalf of the manufacturer?
There may be instances where a distributor of a 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 the replacement of any part or for any service, then GST will be payable on such supply with respect to such additional consideration.
[Circular No. 07/2023 – GST (State)]
