Question ID :
Clarification required regarding Payment of GST on Tool Amortisation
It is the common practice in foundry industry that Patterns and Tools are developed at manufacturer’s end
for the customer. The invoice for such tool pattern is raised on the customer. While raising the Invoice
only Sales Tax (i.e.Central Sales Tax State Sales Tax) is levied but Excise duty was not levied as it is
leviable on production but payable on Removal of Goods.
While manufacturing the finished goods, manufacturer captively consumed such tool pattern. As per the
clarification issued through Circular No. 170-4-96-CX dated 23-01-1996, CBEC clarified that the
proportionate cost of pattern has to be included in the assessable value of the casting even in cases when
such patterns are being supplied by the buyers of the casting or are got prepared manufactured by the job
worker at the cost of the buyer. In cases where there is difficulty in apportioning the cost of pattern,
apportionment can be made depending on the expected life and capability of the pattern and the quantity of
castings that can be manufactured from it and thus working the cost to be apportioned per unit. For this
purpose, a certificate from a Cost Accountant may be accepted.
In such situations, specifically during the transition, Transitional Provisions in GST ACT are not clear
about payment of Central Tax (i.e Central Excise CGST) on the value of such tools or patterns, the cost
of which remained unamortised as on 30th June 2017.
More Specifically -
- Whether the assesse is required to pay Central Excise on the Unamortised Value as on 30th June, 2017?
- Whether same scheme of amortization as assesse was following under Excise, shall be followed under GST
or GST shall be payable on transaction value i.e. on the value finished goods without amortization?
- If amortization is not considered for valuation, in that case whether it amounts to violation of Valuation
Provisions or rules made under the provisions of the GST Act?
Gangadhar Vijay Haldikar
Jun 07, 2018