Question

XYZ(India) importing goods from PQR (Japan) which is a parent company. XYZ re-selling these goods to customers in India. During warranty period, if any defect found in these goods, XYZ giving free replacement to the customers in India and the amount for the same is recovered from PQR as reimbursement of warranty charges. Is XYZ required to pay GST on it? If yes under which provisions?

Answer

XYZ is providing service to PQR by selling goods of PQR in India and is also providing support service to PQR by providing warranty service (support service) to customers in India for which PQR reimburses warranty charges to XYZ.

As the warranty service provided is a taxable service, further the location of supplier and the place of supply is in India therefore XYZ is liable to pay GST on warranty charges received under forward charge. It is immaterial whether the charges for warranty services are paid (reimburse) by PQR or by customer. (Reply dt.08/12/2018)