Under the GST (Goods and Services Tax) regime in India, GST credit reversal is applicable when goods that have been previously supplied are subsequently used for free supply under warranty period.
When goods are supplied under warranty period, it is considered to be a supply of services as per the GST law, and the supplier is required to pay GST on the value of the goods used for such supply. In such a case, the GST credit that was claimed by the supplier at the time of purchase of the goods, needs to be reversed.
The amount of GST credit reversal will depend on the original input tax credit claimed on the goods used for free supply under warranty period, and the rate of tax applicable to such goods. The GST credit reversal will be calculated as follows:
GST credit reversal = (Original input tax credit claimed / Total value of goods) x Value of goods used for free supply under warranty period
For example, if a supplier had purchased goods worth Rs. 10,000 with an applicable GST rate of 18%, and had claimed input tax credit of Rs. 1,800, but subsequently uses the goods for free supply under warranty period with a value of Rs. 2,000, then the GST credit reversal would be calculated as follows:
GST credit reversal = (Rs. 1,800 / Rs. 10,000) x Rs. 2,000 = Rs. 360
In this example, the supplier would need to reverse GST credit of Rs. 360 and pay the same to the government.
It is important for businesses to ensure compliance with GST laws and properly account for GST credit reversal on goods used for free supply under warranty period.
Yes, under the GST (Goods and Services Tax) regime in India, it is mandatory to reverse the input tax credit (ITC) claimed on goods that are subsequently used for free supply under warranty period.
When goods are supplied under warranty period, it is considered to be a supply of services as per the GST law, and the supplier is required to pay GST on the value of the goods used for such supply. In such a case, the GST credit that was claimed by the supplier at the time of purchase of the goods, needs to be reversed.
The amount of GST credit reversal will depend on the original input tax credit claimed on the goods used for free supply under warranty period, and the rate of tax applicable to such goods. The GST credit reversal will be calculated as follows:
GST credit reversal = (Original input tax credit claimed / Total value of goods) x Value of goods used for free supply under warranty period
For example, if a supplier had purchased goods worth Rs. 10,000 with an applicable GST rate of 18%, and had claimed input tax credit of Rs. 1,800, but subsequently uses the goods for free supply under warranty period with a value of Rs. 2,000, then the GST credit reversal would be calculated as follows:
GST credit reversal = (Rs. 1,800 / Rs. 10,000) x Rs. 2,000 = Rs. 360
In this example, the supplier would need to reverse GST credit of Rs. 360 and pay the same to the government.
It is important for businesses to ensure compliance with GST laws and properly account for GST credit reversal on goods used for free supply under warranty period. Failure to do so can result in penalties and legal consequences.
under the GST (Goods and Services Tax) regime in India, GST credit reversal is applicable when goods that have been previously supplied are subsequently used for free supply under warranty period.
When goods are supplied under warranty period, it is considered to be a supply of services as per the GST law, and the supplier is required to pay GST on the value of the goods used for such supply. In such a case, the GST credit that was claimed by the supplier at the time of purchase of the goods, needs to be reversed.
The amount of GST credit reversal will depend on the original input tax credit claimed on the goods used for free supply under warranty period, and the rate of tax applicable to such goods. The GST credit reversal will be calculated as follows:
GST credit reversal = (Original input tax credit claimed / Total value of goods) x Value of goods used for free supply under warranty period
For example, if a supplier had purchased goods worth Rs. 10,000 with an applicable GST rate of 18%, and had claimed input tax credit of Rs. 1,800, but subsequently uses the goods for free supply under warranty period with a value of Rs. 2,000, then the GST credit reversal would be calculated as follows:
GST credit reversal = (Rs. 1,800 / Rs. 10,000) x Rs. 2,000 = Rs. 360
In this example, the supplier would need to reverse GST credit of Rs. 360 and pay the same to the government.
Therefore, it is important for businesses to ensure compliance with GST laws and properly account for GST credit reversal on goods used for free supply under warranty period.
Deen Dayal Upadhyaya Grameen Kaushalya Yojana or DDU-GKY
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