No GST On Replacement Parts & Services Provides During Warranty Period

New Delhi, July 14: The GST council, which met earlier this week, has made it clear that the replacement of parts, goods and repair services will not attract GST during the warranty period.

The levying of GST on these items and services covered under the warranty had become a vexing issue. Several applications had been filed with the authorities for advance rulings (AARs) on this matter. The clarification from the GST council is expected to reduce the need for companies to approach AARs or face notices from tax departments, reported Business Standard.

According to experts, when a manufacturer supplies replacement parts or provides repair services free of cost during the warranty or guarantee period, GST should not be levied due to the absence of consideration. This is because the original supply of goods already included the cost of potential replacements during the warranty period.

Furthermore, since the value of the earlier supply already accounts for the charges to be incurred during the warranty period, the supplier is not obligated to reverse the Input Tax Credit on parts or components replaced under warranty.