27 Jun CBIC Circular No. 216/10/2024-GST: GST Liability & ITC for Warranty & Extended Warranty
The CBIC has issued Circular No. 216/10/2024-GST dated June 26, 2024, clarifying GST liability and input tax credit (ITC) availability in relation to warranty and extended warranty scenarios, following up on Circular No. 195/07/2023-GST dated July 17, 2023.
Background: This circular addresses industry concerns and provides further clarity on GST implications and ITC availability related to warranty replacements and extended warranties.
Key Clarifications:
Warranty Replacements:
- The circular extends the clarification on GST liability and ITC reversal provided in Circular No. 195/07/2023-GST to cases where goods as a whole are replaced under warranty, not just parts.
Distributor Handling of Warranty Replacements:
- It clarifies situations where distributors replace goods from their own stock under warranty on behalf of manufacturers. The distributor subsequently receives replenishments from the manufacturer without additional consideration, aligning with the GST treatment outlined in Circular No. 195/07/2023-GST.
Extended Warranty:
- Regarding extended warranty agreements:
- If extended warranty is agreed upon at the time of original goods supply and the supplier of the warranty is different from the goods supplier, it is treated as a separate service transaction.
- If extended warranty is sold after the original supply, it is treated as a distinct supply of services, separate from the supply of goods.
Conclusion: The circular emphasizes that extended warranty agreements, whether concurrent with the original goods sale or subsequent, are to be treated as services distinct from the supply of goods, with respective GST liabilities.
Stakeholders are advised to disseminate and adhere to the guidelines outlined in this circular. For detailed information, please refer to Circular No. 216/10/2024-GST dated June 26, 2024, available here.
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