Tools Supplied by OEM to Component Manufacturer for free shall not be added to Value of Component
Facts of the case:
- Assessee is involved in manufacturer and sale of plastic moulds, press tools, jigs/fixtures/gauges, injection moulded parts and design services as per specific orders & requirements of their customers.
- The injection moulded parts (tools), as per specific order from customer, were manufactured using plastic granules as raw material and using in-house injection moulding machines. The applicant submitted that the tool was either manufactured by them or supplied by the customers free of cost, for production of ‘parts’, on returnable basis
- With given arrangements, Appellant submitted following contentions before the Authority of Advance Ruling (AAR):
- Tools supplied by OEM on FOC basis be classified as capital goods, and therefore, has a specific life and could produce only certain volume of total production.
- Since the tools/dies has been supplied on FOC and on returnable basis, the amortisation value of same shall not be included in transaction value of goods supplied to customer.
Findings and Rulings:
Authority passed the ruling in favour of assessee and upheld the CBIC Circular No 47/21/2018-GST dated 08.06.2018, stating that the cost of tool/s supplied by OEM on FOC basis to applicant need not to be added to transaction value of the parts supplied by applicant, only when the applicant is not under any obligation to use their own tools/ moulds for manufacture of the components and same are supplied to them on free of cost and on returnable basis.
Source: [2019] 108 taxmann.com 107 (AAR – KARNATAKA), dated 8th August, 2019.
