In re M/s. Nash Industries (I) Pvt. Ltd (GST AAAR Karnataka)
The appallate authority for advance ruling has set aside the rulings passed under section 98(4) of the CGST Act 2017 vide NO. KAR ADRG 24/2018 dated 25/10/2018 i.e. Contention of the appellant is allowed based on examination of the contract and purchase orders furnished.
Question- Whether the amortized cost of the tools is to be added to arrive at the value of the goods supplied for the purpose of GST under Section 15 of the CGST Act, 2017 read with Rule 27 of CGST Rules, 2017?
AAAR set aside the ruling of the AAR and hold that the cost of the tools supplied by the OEM customer on FOC basis to the Appellant is not required to be added to the value of the components supplied by the Appellant. We emphasize that the ruling given by us in this appeal proceeding is based on examination of the contract and purchase orders furnished by the Appellant in the case of their customer M/s Daimler India Commercial Vehicles Pvt Ltd. This ruling will apply to other contracts entered into by the Appellant only if the terms and conditions contained therein are the same as those contained in the contract placed before us.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, KARNATAKA
At the outset, we would like to make it clear that the provisions of both the COST Act and the KGST Act are parimaleria and have the same provisions in like matters, and differ from each other only on a few specific provisions; therefore, unless a mention is particularly made to such a dissimilar provision, a reference to the CGST Act would also mean a reference to the corresponding similar provisions under the KGST Act.
The present appeal has been filed under section 100 of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as ” the COST Act and KGST Act”) by M/s. Nash Industries (I) Private Limited,(herein after referred to as the “Appellant’) against the Advance Ruling No. No. KAR ADRG 24/2018 dated 25th October 2018.
BRIEF FACTS OF THE CASE
1. M/s. Nash Industries (I) Private Limited is registered under GST with GSTIN No. 29AADCN95580I 2C and is a manufacturer of sheet metal pressed components and supplies to industrial customers like Automotive, Banking Hardware. Power Protection, Alternate Energy etc. The tools required to manufacture these components were designed and manufactured by the Appellant. Such manufactured tools are billed to the customer and the payment is received for the same but the tools are retained by the Appellant for the manufacture of components.
2. The Appellant had filed an application for Advance Ruling under section 98 of the CGST Act, 2017 and KGST Act, 2017 on the following question:
a. Whether the amortized cost of the tools is to be added to arrive at the value of the goods supplied for the purpose of GST under Section 15 of the CGST Act read with Rule 27 of CGST Rules.
3. The Karnataka Authority for Advance Ruling, vide Advance Ruling No. ADRG 24/2018 dated 25thOctober 2018 (hereinafter referred to as ‘Impugned Order) gave the following ruling:
“The amortised cost of tools which are re-supplied back to the applicant free of cost shall be added to the value of the components while calculating the value of the components supplied as per Section 15 of the CGST/KGST Act,2017.”
4. Aggrieved by the said ruling of the Authority, the applicant has filed an appeal under section 100 of the CGST Act, 2017 / KGST Act, 2017 on the following grounds:
4.1. The appellant submitted that the purchase order provided by the recipient/customer is only for the manufacture of components out of the tools supplied by the recipient at free of cost.
4.2. Further, the appellant submitted that the CBIC vide Circular No.47/21/2018-GST dated 08.06.2018 has clarified the position regarding amortization of tool cost supplied free of cost by the customer, to the value of components manufactured by the component manufacturer. The relevant extract of the circular is provided below:
