2018 (11) TMI 607 - AAR - GST

Valuation of goods supplied - inclusion of amortised cost of the tool in assessable value - Held that - The transaction value carried out at an arms length, constitutes the value of supply. Further, Section 15(2) of the CGST Act provides for the inclusion of several other related / relevant amounts in the value of taxable supply. There is no scope of any dispute in this situation about the fact that the cost of the tools is an essential element to be included in the cost of the component finally supplied by the applicant. This is also because without the tools the final component could not have been manufactured. Ruling - The amortised cost of tools which are re-supplied back to the applicant free of cost shall be added to the value of the components while calculating the value of the components supplied as per the Section 15 of the CGST / SGST / IGST Act 2017.

Summary

Issues:
- Interpretation of Section 15 of the CGST Act regarding the inclusion of amortized cost of tools in the value of goods supplied for GST purposes.

Analysis:
1. Background and Question Raised:
- The applicant, a manufacturing company, sought an advance ruling on whether the amortized cost of tools should be added to the value of goods supplied for GST calculation.
- The applicant referenced previous Central Excise Valuation Rules and judicial decisions to support their position.

2. Facts Presented by the Applicant:
- The applicant manufactures components using tools designed and billed to customers, even though the tools are retained by the applicant.
- The applicant argued that the cost of amortization should be added to the value of goods supplied based on past tribunal and court decisions.

3. Findings and Discussion:
- The Authority identified two distinct supplies: first, the applicant manufactures tools for customers, and second, customers provide tools back to the applicant for component manufacturing.
- Analyzing Section 7(1) of the CGST Act, the Authority concluded that the free supply of tools back to the applicant does not constitute a taxable supply.
- Section 15 of the CGST Act was examined, particularly Section 15(2)(b), which states that any amount incurred by the recipient but not included in the price should be added to the value of taxable supply.
- The Authority determined that the amortized cost of tools provided back to the applicant at no cost should be included in the value of components supplied for GST calculation.

4. Ruling:
- The Authority ruled that the amortized cost of tools re-supplied back to the applicant at no cost must be added to the value of components for GST valuation under Section 15 of the CGST Act.

This detailed analysis of the judgment clarifies the interpretation of Section 15 of the CGST Act regarding the treatment of amortized tool costs in the valuation of goods supplied for GST purposes.