In re High Energy Batteries (India) Limited (GST AAR Tamilnadu)
Tamil Nadu Authority for Advance Ruling (AAR) has held that the value of silver supplied free of cost by Naval formations in the form of used batteries must be included in the taxable value of new batteries manufactured and supplied by M/s High Energy Batteries (India) Limited. The ruling clarifies the tax treatment of free-of-cost (FOC) inputs in the manufacturing process and aligns with the provisions of the Central Goods and Services Tax (CGST) Act, 2017.
M/s High Energy Batteries, engaged in manufacturing Silver Oxide Zinc Torpedo Propulsion Batteries and Secondary Silver Oxide Zinc Rechargeable Batteries, sought an advance ruling on whether the free silver provided by Naval formations should be included in the taxable value of the batteries. The company argued that under Section 15 of the CGST Act, the transaction value agreed between the supplier and the recipient should be considered, and the cost of free inputs should not be added. They also relied on CBIC Circular No. 47/21/2018-GST and the ruling in Lear Automotive India Pvt. Ltd., where the Maharashtra AAR had excluded the value of free-of-cost tools from the taxable value of finished goods.
However, the Tamil Nadu AAR distinguished this case from the Lear Automotive ruling, noting that the CBIC circular applied specifically to tools and dies used in manufacturing, whereas silver is a key input material. The ruling emphasized that under Section 15 of the CGST Act, the taxable value must include all forms of consideration, whether monetary or otherwise. Since the extracted silver from the used batteries is a critical component of the new batteries, its value must be included in the taxable amount.
