In re Enerzi Microwave Systems P Ltd (GST AAR Gujarat)
A Gujarat-based company providing warranty services for a German manufacturer has been denied Input Tax Credit (ITC) on Integrated Goods and Services Tax (IGST) paid by the foreign supplier on imported spare parts. The Authority for Advance Ruling (AAR), Gujarat, held that the Indian company was not eligible for the credit as the IGST was not borne by them, and the value of the imported parts was not included in their taxable outward supply of warranty services.
The applicant, M/s. Enerzi Microwave Systems P Ltd., registered in Surat, is the authorised dealer and service representative in India for M/s. MUEGGE GmbH, Germany, a manufacturer of industrial microwaves. Under a dealership and service representation agreement, Enerzi Microwave Systems is obligated to provide warranty services to MUEGGE’s customers in India.
According to the agreement and the applicant’s submissions, when parts require replacement under warranty for the imported industrial microwaves, these parts are also imported into India. A key point of the arrangement is that the IGST levied on the import of these replacement parts is paid by the foreign supplier, M/s. MUEGGE GmbH.
Enerzi Microwave Systems provides the warranty service to the end customers free of charge, as per the warranty terms offered by MUEGGE. Enerzi Microwave Systems, in turn, raises invoices for these warranty services to M/s. MUEGGE GmbH in Germany, collecting service charges from them. The applicant stated that applicable GST is paid on these service charges collected from the German supplier.
