Circular No. 195/07/2023-GST dated 17.07.2023 was earlier issued clarifying the issues related to the applicability of GST and reversal of ITC concerning material supplies under warranty and extended warranty, the applicability of GST on warranty service provided at the time of supply of goods, etc. CBIC received various representations to provide clarifications on certain other related issues.
In line with the same, CBIC issued the following clarification vide circular No. 216/10/2024-GST dated 26th June 2024 in furtherance of the earlier circular.
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1. Applicability of GST and liability to reverse ITC in case of replacement of goods itself under GST
- Para No. 2 of Circular No. 195/07/2023-GST dated 17.07.2023 discusses the applicability of GST and liability to reverse ITC only in the scenario when the parts of the product are replaced under warranty.
- However, what about the situation when the complete product itself gets replaced under warranty?
- Circular No. 126 has clarified that where goods are replaced as such under warranty period, Para 2 of Circular No. 195/07/2023-GST dated 17.07.2023 shall also be applicable in such case.
- Accordingly, supply of goods under warranty can’t be considered as an exempted supply and therefore, suppliers are not required to reverse ITC with respect to such supply and also no GST is payable on the same.
2. When distributors replace goods or parts from their stock under warranty and later get these goods or parts replenished by manufacturers:
- Circular No. 195 clarifies the provisions related to GST and ITC reversal in cases where the distributor provides replacement of parts on behalf of the manufacturer.
- However, what about the cases where the distributor replaces the goods out of his stock and then raises a requisition for the same to the manufacturer?
- Upon receipt of the requisition, The manufacturer provides the said goods to the distributor through a delivery challan. The request has been made to issue clarification in respect of such a scenario.
- distributor providing replacement out of his own stock;
- manufacturer replenishing the distributor for the said replacement; and
- Such replacement is made at no additional cost to the distributor.
- Circular No. 216 dated 26th June 2024 has clarified that no GST is payable on such replenishment of goods or parts. Further, no reversal of ITC is required to be made by the manufacturer in respect of the goods or the parts so replenished to the distributor.
3. GST Liability on extended warranty service taken at the time of original supply and such service is provided by a person other than supplier of the goods:
3.1 Extended warranty provided at the time of original supply
- Para No. 6 of Circular No. 195 has clarified that where an extended warranty is provided at the time of supply of goods then such supply shall be considered as composite supply (consisting of the supply of goods and warranty service) and GST shall be charged at the rate applicable on principal supply, i.e., supply of goods.
- However, where extended warranty at the time of original supply is provided by a third party then supplies being made by different suppliers can’t be considered as composite supply.
- Therefore, such supply of extended warranty shall be considered as a separate supply from the original supply of goods.
- Accordingly, GST shall be charged at the rate applicable to the supply of warranty services.
3.2 Extended warranty provided after the original supply of goods
- In cases where an extended warranty is sold after the supply of original goods then Circular No. 195 has clarified that GST on the same would be payable depending on the nature of the contract (i.e. whether the extended warranty is only for goods or services or composite supply involving goods and services).
- Accordingly, CBIC has issued the following additional clarification in this matter through Circular No. 216:
- 延長保証の提供は、保証期間中に製品が欠陥なく動作することを保証するものです。製造時の材料や製造上の欠陥に起因する不具合が生じた場合、保証サービス提供者が修理または交換を行います。
- 延長保証期間中に部品の交換が必要になるか、修理のみで済むか、あるいはそのどちらも必要ないかは、延長保証サービス提供時点では不明です。
- したがって、延長保証は「保証」という性質のものであり、実際の部品交換や修理そのものではありません。
- これに基づき、CBICは、延長保証が（製品の当初供給時か後かを問わず）独立した供給とみなされる場合、それは製品の当初供給とは区別されるサービスの供給として扱われるべきであると明確にしました。
- そのため、適用税率に基づきGST（物品サービス税）が課されます。
- 延長保証に対するGSTは、以下の方法で課税されます：
- 当初供給時に提供される延長保証：製品供給に適用される税率での複合供給として課税される
- 当初供給後に提供される、または別の供給者によって提供される延長保証：サービスの供給とみなされ、当該サービスに適用される税率で課税される。
4. 結論：
本通達により、保証に基づく製品の交換自体（対価を伴わないもの）は免税供給とはみなされず、したがって対応するITC（仕入税額控除）の取り消しは不要であることが明確になりました。さらに、製品供給時に別の供給者が提供する延長保証、または製品販売後に提供される延長保証は、独立した供給とみなされ、適用税率でGSTが課されます。本通達は、保証サービスおよび保証サービス下で供給される材料の課税に関する重要な論点を解決するものです。
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