Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 23-2-2019 – In this article the author aims to enlighten its readers about the inclusion or non-inclusion of value of FOC material provided by the buyer/service receiver to the seller/service provider.2017 Statutory provisions related to valuation are principally carved out in the Section 15 of the CGST Act 2017. The relevant portion of the said provisions related to the concept clarified hereunder is mentioned as under:- Section 15 Value of taxable supply (1) (2) The value of supply shall include – (a) ……………….. (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) …… (d) …… (e) ………… Thus where free of cost supply is made by the receiver to the suppli
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FOC basis dose not constitute a supply as there is no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement of reversal of input tax credit availed on such moulds and dies by the OEM. 1.2 It is further clarified that while calculating the value of the supply made by the component manufacturer, the value of moulds and dies provided by the OEM to the component manufacturer of FOC basis shall not be added to the value of such supply because cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b) of the CGST Act 2017. 1.3 However, 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 manufa
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GST had been charged. Thus the absolute ownership of the tools gets transferred to the OEM. However, the physical possession of the tool remains with the applicant during manufacturing process or till the time they are removed by the receiver form the premised of the supplier. Having regard to the clarification issued by the department as mentioned above and in the facts we need to ascertain the contractual obligation to provide tools in terms of the contract executed between the supplier and the receiver. Once it is established that the obligation to provide tools on FOC basis is on the receiver then the question of adding the amortized value for tools supplied by the receiver does not arise. Conclusively, in the given facts of the case the supplier is not required to add value of tools while calculating value of its principle supply of manufacturing of the product under Section 15(2)(b) of the CGST Act, 2017. – CA Akash Phophalia 9799569294 ca.akashphophalia@gmail.com – Articles – Kn
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