Whether activity of providing warranty services and replacing defective parts for customer in India on behalf of Volvo Sweden amounts to supply of services (to Volvo Sweden) under the GST law and consequently qualifies as export of service?

PJ/Case Law/2019-2020/3595

Volvo-Eicher Commercial Vehicles Limited KAR-ADRG 32/2019 dated 12.09.2019 Brief Facts:-The Applicant is engaged in the business of selling of Volvo branded trucks and thereafter providing after sales support services including warranty services in respect of products sold in India. The cost of servicing the warranty claims along with replacement of goods (if any) are reimbursed by Volvo Sweden in the form of issuance of a ‘Warranty Credit Note Acceptance’’
Issue: -Whether activity of providing warranty services and replacing defective parts for customer in India on behalf of Volvo Sweden amounts to supply of services (to Volvo Sweden) under the GST law and consequently qualifies as export of service?
Applicant Contention: -The contention of the Applicant is that the supply of parts for repair and replacement under warranty claims along with services of fitting out of defective parts, is composite supply, where supply of services being the principal supply on the basis of the following grounds:
-Referring to section 7 of the CGST Act, the transaction between the applicant and Volvo Sweden is supply of goods and services for a consideration received from Volvo Sweden.
-As per section 2(30) of the CGST Act, the transaction is primarily supply of services and in certain cases the applicant provides replacement of defective parts in the course of honouring the warranty claim. Hence, replacement of defective parts is ancillary to the principal supply of service.
-The transaction is for providing warranty services to recipient located outside India(Volvo Sweden). Though the goods are required to be made physically available for providing services, but the goods are made available by the Customers in India & not the recipient of service i.e. Volvo Sweden, the place of supply of services would not fall in the ambit of section 13(3)(a) of the IGST Act.
-Applicant further contended that, in the absence of specific provision for determination of place of supply of service, reliance shall be placed on the default provision for determination of place of supply of service i.e. the location of service recipient.
-Further, the applicant has fulfilled all the conditions set out in section 2(6) of the CGST Act. Thus, the transaction of supply of warranty services along with replacement of defective parts (whenever required) shall qualify as export of service.
Reasoning of the Judgement: -The Authority observed that there is supply of parts and services to the customer for consideration and the same amounts to a supply transaction, with the applicant being the supplier and the customer being the recipient of services, but the amount collectable from the customer is being paid by Volvo Sweden.
Held: - The Authority for Advance Rulings held that the services are provided to customers located in India, where the consideration is paid by Volvo Sweden. The transaction is not an export of services and consequently will not be treated as Zero- rated supply under the IGST Act. The applicant is providing composite supply of goods and services to the customers where in the principal supply is that of goods or services depending on the nature of individual case. The transaction is either an intra-State or inter-State transaction but not export transaction.
Comment: - The Authority has failed to note the definition of the recipient in section 2(93) of the CGST Act, 2017 to mean a person who is liable to pay the consideration. In the instant case, to the extent the manufacturer is liable to pay the consideration to the applicant for the after-sale service, he is the recipient, thereby satisfying the conditions of export of service.

Prepared By- CA Kartik Singhvi

Comments

PJ/Case Law/2019-2020/3595

Post a Comment

Query