GST on Tooling development charges - Export, Goods and Services Tax - GST

[K.Srinivasan Kuppuswamy]

Sir,

We are casting manufacturing industry . To manufacture castings we need to develop tool as per the overseas customer specification. Once the tool is developed and after submission of samples approved by customer we used to raise debit note on overseas customer .

The tool retained by us for further manufacture of components .

In the pre GST regime there is no excise duty applicable on debit for the tool cost recovery from overseas customer.

Please provide your valuable views in the GST regime whether GST is applicable on debit note on overseas customer for the tooling cost recovery for which the tool retained by us for further manufacturing of components

Regards

K.Srinivasan

Posts / Replies

[Ramaswamy S]

The invoice/ debit note is towards the expense incurred to develop the tool. The supply is a service and not goods. It is an export of service and no GST is payable.

Am told by one of the consultants in Maharashtra that they had approached the GST officials in Kolhapur and they have said it is an export of service. His clients do not charge GST treating it as export of service and receive the payment in foreign Currency.

Regards

S.Ramaswamy

[K.Srinivasan Kuppuswamy]

Sir

Good Evening.

We are not doing service activity.. We are making the new tool as per customer specifications / drawings and debit note raised for recovery for the tool.

Tool retained by us for further manufacture of components.

Whether the debit note will be treated as export of goods or export of service and GST applicability

Regards

K Srinivasan

[Ramaswamy S]

Yes the tool is retained for the purpose of manufacture of components. The tool is developed and the sample is approved by the customer. It can be treated as a supply of service (export of service). No GST is payable.

If you have to treat it as supply of goods, then it cannot be considered as an export as there is no shipping bill to prove that the goods have left the country.

The point of service is intra state and CGST+SGST is payable, the ITC of which cannot be claimed being an outward supply. Further, as the customer is not in the taxable territory, he cannot avail the ITC. The taxes cannot be exported. The customer shall not reimburse / pay the GST.The GST payable as goods is a cost to be absorbed. Unnecessary litigation and cost.

Advisable to treat it as export of service. Export realization in FC.

In our case too, we also treat it as export of service.

Regards

S.Ramaswamy

[K.Srinivasan Kuppuswamy]

Sir,

We are casting manufacturing industry . To manufacture castings we need to develop tool as per the overseas customer specification. Once the tool is developed and after submission of samples approved by customer we used to raise debit note on overseas customer .

The tool retained by us for further manufacture of components .

In the pre GST regime there is no excise duty applicable on debit for the tool cost recovery from overseas customer.

Please provide your valuable views in the GST regime whether GST is applicable on debit note on overseas customer for the tooling cost recovery for which the tool retained by us for further manufacturing of components.

Can we split the tool cost into two one portion is tool cost and other portion is development charges.

Development charges debit note on export customer will attract GST.

Whether can we split tool cost.

manufactures those who are developing the tool for customer for manufacturing of components unable to raise debit note or invoice on overseas customer in the GST regime.

What is the ultimate remedy?

Regards

K.Srinivasan

[K.Srinivasan Kuppuswamy]

Sir,

Further to your opinion , (The invoice/ debit note is towards the expense incurred to develop the tool. The supply is a service and not goods. It is an export of service and no GST is payable.

Am told by one of the consultants in Maharashtra that they had approached the GST officials in Kolhapur and they have said it is an export of service. His clients do not charge GST treating it as export of service and receive the payment in foreign Currency.)

Under stand that in the case of Tata johnson control vs state of Maharastra , High court confirms it is not possible to split the tool and development charges .

Any specific board circular / Notification to raise for raising debit note on overseas customer for tooling without physical movement for which GST not applicable.

Regards

K Srinivasan