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Circular No. 216/10/2024-GST
F. No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
North Block, New Delhi
Dated the 26th June, 2024
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification in respect of GST liability and input tax credit (ITC) availability
in cases involving Warranty/ Extended Warranty, in furtherance to Circular No.
195/07/2023-GST dated 17.07.2023-reg.
Reference is invited to Circular No. 195/07/2023-GST dated 17.07.2023 (herein after
referred to as “the said circular”) clarifying certain issues regarding GST liability and
availability of input tax credit (ITC) in respect of warranty replacement of parts and repair
services during warranty period. Representations have been received from trade and industry
requesting for some further clarifications in related matters.
2.
In order to ensure uniformity in the implementation of the provisions of law across the
field formations, the Board, in exercise of its powers conferred by section 168 (1) of the
Central Goods & Services Tax Act, 2017 (herein after referred to as the “CGST Act”), hereby
clarifies the following issues as below.
3.
Clarification regarding GST liability as well as liability to reverse input tax
credit in respect of cases where goods as such or the parts are replaced under warranty:
3.1
Table in Para 2 of Circular No. 195/07/2023-GST dated 17.07.2023 clarifies
regarding GST liability as well as liability to reverse ITC, only in cases involving
replacement of 'parts' and not if goods as such are replaced under warranty. Request has been
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made to also issue a clarification in respect of cases where the goods as such are replaced
under warranty.
3.2
In cases where warranty is provided by the manufacturer/ suppliers to the customers
in respect of any goods, and if any defect is detected in the said goods during the warranty
period, the manufacturer may be required to replace either one or more parts or the goods as
such, depending upon the extent of damage/ defect noticed in the said goods. However, Table
in Para 2 of the said circular only clarifies in respect of the situations involving replacement
of part/ parts and does not specifically refer to the situation involving replacement of goods
as such. It is clarified that the clarification provided in Para 2 of the said circular is also
applicable in case where the goods as such are replaced under warranty.
3.3
Accordingly, wherever, ‘any part,’ ‘parts’ and ‘part(s)’ has been mentioned in Para 2
of Circular No. 195/07/2023-GST dated 17.07.2023, the same may be read as ‘goods or its
parts, as the case may be’.
4.
Clarification in respect of cases where the distributor replaces the parts/ goods to
the customer as part of warranty out of his own stock on behalf of the manufacturer and
subsequently gets replenishment of the said parts/ goods from the manufacturer:
4.1
Sr. No. 4 of Para 2 of the said Circular clarifies about the GST liability as well as
liability to reverse ITC in cases where the distributor provides replacement of parts to the
customer as part of warranty on behalf of the manufacturer. However, it does not cover the
scenario where the distributor replaces the goods to the customer as part of warranty out of
his own stock on behalf of the manufacturer to provide prompt service to the customer, and
then raises a requisition to the manufacturer for the goods replaced by him under warranty.
The manufacturer, thereafter, provides the said goods to the distributor vide a delivery
challan, as replenishment for the goods provided as replacement to the customer by the
distributor. Request has been made to issue clarification in respect of such a scenario also.
4.2
In cases where the distributor replaces the parts/ goods to the customer as part of
warranty out of his own stock on behalf of the manufacturer and subsequently gets
replenishment of the said parts/ goods from the manufacturer, the key aspects, viz.(i)
distributor providing replacement out of his own stock; (ii) manufacturer replenishing the
distributor for the said replacement; and (iii) the replacement being made at no additional cost
on the distributor, are all covered in the scenario specified in point (b) of Sr. No.4 of Para 2 of
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the said Circular. Therefore, GST liability as well as liability to reverse ITC in cases covered
by the said scenario should be similar to that in respect of the scenario covered in point (b) of
S. No. 4 of Para 2 of the above circular.
4.3
Accordingly, to specifically clarify in respect of such a scenario, in column 3 of the
table in Para 2 of the said circular, against S. No. 4, after point (c), point (d)shall be inserted
as below:
“(d) There may be cases where the distributor replaces the goods or its parts to the
customer under warranty by using his stock and then raises a requisition to the
manufacturer for the goods or the parts, as the case may be. The manufacturer then
provides the said goods or the parts, as the case may be, to the distributor through a
delivery challan, without separately charging any consideration at the time of such
replenishment. In such a case, no GST is payable on such replenishment of goods or
the parts, as the case may be. Further, no reversal of ITC is required to be made by the
manufacturer in respect of the goods or the parts, as the case may be, so replenished to
the distributor.”
5.
(i) Nature of supply of extended warranty, at the time of original supply of goods,
as a separate supply from supply of goods, if the supply of extended warranty is
made by a person different from the supplier of the goods;
(ii) Nature of supply of extended warranty, made after original supply of goods:
5.1
It has been represented that in respect of cases, where agreement for extended
warranty is made at the time of original supply of goods, and the supplier of extended
warranty is different from the supplier of goods, the extended warranty should be treated as a
separate and independent transaction from the supply of goods, whereas Sr. No. 6 of Para 2
of the said Circular has treated it to be in the nature of composite supplies, the principal
supply being the supply of goods. Request has been made to issue a suitable clarification in
the matter.
5.1.1 There may be cases where the supplier of the goods may be the dealer while the
supplier of extended warranty may be the OEM or third party. In such cases, the supplies
being made by different suppliers cannot be treated as part of the composite supply. It is,
therefore, clarified that in cases, where agreement for extended warranty is made at the time
of original supply of goods, and the supplier of extended warranty is different from the
supplier of goods, the supply of extended warranty and supply of goods cannot be treated as
