No ITC on Imported Parts Used for Free Warranty Services | AAR

Case Details: Enerzi Microwave Systems (P) Ltd., In re - [2025] 174 taxmann.com 960 (AAR–GUJARAT)

Judiciary and Counsel Details

• P.B. Meena & Kamal Shukla, Member
• Rupesh Agashimani, Director for the Applicant.

Facts of the Case

The applicant entered into a dealership and service representation agreement with a foreign supplier to provide warranty services to the latter’s customers located in India. Under the terms of this arrangement, spare parts required for warranty replacements were imported into India in the applicant’s name, though the IGST on such imports was paid by the foreign supplier. The applicant did not include the value of the spare parts in the taxable value of its outward supply while invoicing the foreign supplier for the warranty services rendered. =

A sample invoice submitted with the application, confirmed that no separate consideration was charged for the parts. The applicant sought a ruling on the eligibility to avail input tax credit (ITC) of the IGST paid on these imported parts, contending that such credit was reflected in its Form GSTR-2B. The matter was accordingly placed before the Authority for Advance Ruling (AAR), Gujarat.

AAR Held

The AAR, Gujarat held that the applicant was not entitled to claim ITC of the IGST paid on the imported parts under Section 16 of the CGST and Gujarat GST Act, 2017. It was observed that ITC is not an automatic or vested right upon import, and accrues only when all prescribed conditions are met, including the use of inputs in a taxable outward supply. Since the applicant did not charge for the spare parts and their value was not included in the taxable supply invoice, the inputs did not participate in the taxable outward supply. Consequently, the mere reflection of the credit in Form GSTR-2B could not be considered a valid ground for availment.

The AAR further noted that as no tax was paid on the parts in the outward invoice, the question of avoiding cascading effect did not arise. The applicant was therefore held ineligible to claim ITC on the IGST paid on such imports.