Farm Tractors Limited, Salem (Tamil Nadu) is engaged in the production and supply of tractors to farmers with a provision of two years warranty for replacement of parts, if any along with first three services to be provi

Answer 2(b) As per the CBIC Circular No. 195/07/2023 - GST Dated the 17th July, 2023, the value of original supply of goods (provided along with warranty) by the manufacturer to the customer includes the likely cost of replacement of parts and/or repair services to be incurred during the warranty period. Therefore, these supplies cannot be considered as exempt supply and accordingly, the manufacturer, who provides replacement of parts and/or repair services to the customer during the warranty period, is not required to reverse the input tax credit in respect of the said replacement parts or on the repair services provided. Also refer to recent few cases decided in which Courts ordered in the same situation as clarified above: M/S Bajaj Auto Ltd. vs Commissioner of Central Goods and Service Tax (2022) MJS TVS Motor Company Ltd. vs Commissioner of Central Goods and Service (Tax (2022) M/S Samsung India Electronics Pvt. Ltd. vs Commissioner of Central Goods and Service Tax (2020) Thus, in the given case, the allegation of the officer is not tenable with reference to the clarification issued as above and the ITC claimed on replacement cost by the company is legally valid as per law.