Circular No. 216/10/2024-GST
Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs GST Policy Wing
Dated: 26th June 2024
The Ministry of Finance, through Circular No. 216/10/2024-GST, has issued clarifications regarding the GST liability and Input Tax Credit (ITC) availability for warranty and extended warranty cases. This comes as an extension to Circular No. 195/07/2023-GST, addressing various issues raised by the trade and industry. The objective is to ensure uniformity in implementing the provisions across different field formations.
GST Liability and ITC in Warranty Cases
Replacement of Parts or Goods:
The circular clarifies GST liability and the need to reverse ITC in cases where goods or parts are replaced under warranty. Earlier, only the replacement of parts was addressed. Now, it is specified that if the entire goods are replaced under warranty, the same rules apply. This means no additional GST is payable, and no ITC reversal is needed.
Distributor’s Role in Warranty Replacements:
When a distributor replaces goods or parts from their stock on behalf of the manufacturer, and the manufacturer subsequently replenishes the stock without additional cost, no GST is payable, and no ITC reversal is required. This clarification ensures that distributors can provide prompt service to customers without additional tax burdens.
Extended Warranty Clarifications
Nature of Supply at Original Sale:
Suppose an extended warranty is sold at the time of the original supply of goods and is provided by a different entity than the one supplying the goods. In that case, it is treated as a separate supply. This distinction ensures that the extended warranty is taxed as a service, not as part of the composite supply of goods.
Extended Warranty Sold Separately:
For warranties sold after the original goods supply, the extended warranty is considered a service. This means the GST applicable to services is charged, simplifying the tax implications for extended warranties provided at a later date.
Conclusion
The clarifications provided by Circular No. 216/10/2024-GST address several concerns raised by the industry, ensuring a consistent approach to GST liability and ITC availability in warranty and extended warranty cases. Businesses should take note of these updates to comply with the GST provisions accurately.
By adhering to these clarified guidelines, businesses can avoid unnecessary complications in their GST calculations and ensure smooth operations regarding warranty and extended warranty provisions.
Note: For detailed reading, refer to Circular No. 216/10/2024-GST issued by the Ministry of Finance.