GST valuation clarification on Partial material supply by the customer, Goods and Services Tax - GST

[suresh sathyamurthy]

As per the Purchase Order between A & B

a) A has to supply goods to B,

b) B will have supplying some critical parts to A at Free of cost, which will be part in the final product ( the parts supplied by B is out of scope of the above Purchase Order, A along with the material purchased by him, while assembling will incorporate the parts supplied by B in the final product as per the design given by B, and will be charging as per PO excluding the cost of material supplied by B)

c) Now B has request A to import the material in A's name from B’s parent company situated in foreign country

and B has agreed to reimburse custom duty, GST & clearing charges to A, for which A has to raise separate debit note with GST for claiming the reimbursement.

A will not be paying for the importer, ( the importer will be remaining unpaid)

Request to know from expert

i) Will there be any valuation issue for transaction mentioned in point b

ii) That could be implication for transaction as mentioned in point c above

Thanks in advance

Posts / Replies

[Amit Agrawal]

It is my understanding that goods supplied by A are 'manufactured goods by A' where critical components - given on FOC basis by B - are used in the manufacturing by A.

In such a supply of goods by A, critical components given on FOC basis amounts to 'additional non-monetary consideration' flowing from B to A for supply of the manufactured goods. And valuation for supply by A - for the purpose of charging & paying GST - needs to be arrived as per applicable valuation rule.

Same will be applicable for both scenario b and c listed in the query.

These are personal views of mine and same should not be construed as professional advice / suggestion.