Example

M/s YMC engaged in manufacturing of machinery. They also provide warranty of one year for spares of machinery at the time of sale of machinery. Value charged for such machinery is Rs 5 lakh. The cost of warranty is already included in the value of machinery in the invoice at the time of sale. M/s YMC require to replace two spares of machinery under warranty claim with in specified period for warranty. The query arises whether supply of material against warranty will be subject to GST in terms of clause (I) of Schedule – 1 of CGST Act, 2017 and what is the document on which these spares for the purpose of repair are removed?

Answer

Supply of goods or services under warranty is not said to be without consideration as there is consideration in advance at the time of main supply. Thus supply of material against warranty will not be subject to GST in terms of clause (I) of Schedule – 1 of CGST Act, 2017 and this is normally taxable according to section 7 of CGST act.
But section 31 of CGST act requires a registered person supplying taxable goods or taxable services shall, before or at the time of removal/delivery in case of goods and within prescribed time (30/45 days) in case of services issue tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed.
Thus according to above provision section 31 tax invoice is required to be issued at the time of removal of goods for repair under warranty because earlier issued invoice at the time of main supply is related to that particular supply i.e. machinery and their spare but value includes the value of subsequent supply if any to be made during warranty made.
Thus as the value and tax collected is nil at the time of providing warranty so tax invoice shall be of zero value or Nominal value (If the ERP System does not permit supply at Nil value) but it should be linked with original invoice earlier issued at the time of sale of machinery.