GST on Tool Amortisation – Plastic moulding Dies Moulds
Discussion on Circular no.47/2018-GST
Source circular at the Govt Website CBIC : https://www.cbic.gov.in/resources//htdocs-cbec/gst/Circular_No.47.pdf
The Circular No.47/21/2018- GST dated 08.06.2018 issued by the CBIC refers to the situation where the moulds, jigs etc are given by recipient,[Original Equipment supplier-OEM] on FOC basis to the supplier who uses such moulds, jigs etc. to manufacture and supply the finished goods to the recipient of supply.
It clarifies that it does not constitute a supply under GST since no consideration is charged by the recipient for the moulds, jigs etc. This is only when supplier and recipient are not related persons such as group cos.
The Circular also clarifies that value of usage of moulds, jigs etc. (given on FOC basis) shall not be factored or amortized in the value of supply in a situation where the contract sets out that the recipient of supply shall supply moulds, jigs etc. which would be used by the supplier to manufacture the goods, since the said situation is not covered by Section 15(2)(b) of the CGST Act. Therefore, value of goods supplied on FOC basis cannot be included in the value of the supply as per the existing provisions of CGST Act read in conjunction with the aforesaid circular.
However, it made clear that the case is different where if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to the value of the components.
Once it is established that the obligation to provide tools on FOC basis is on the customer then the question of adding the amortised value of tools supplied by the customer does not arise. However, the situation is reverse where the obligation to use tools is on the applicant but provision for the same is made by the OEM on FOC basis. Ruling:- The amortized value of the tool received on FOC basis from the customer is not required to be included in the value of finished goods manufactured and supplied by the applicant to the customer.
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