This circular provides clarity on GST implications and ITC eligibility for warranty replacements and repair services. It explains that when a manufacturer replaces parts or provides repair services during the warranty period without charging the customer, no GST is payable on such supplies because the cost of warranty is already included in the original price on which tax was paid. Since these are not exempt supplies, the manufacturer is not required to reverse ITC on parts or services used for warranty fulfillment.

Where distributors provide warranty replacements or repairs on behalf of manufacturers, GST is not payable if no consideration is taken from the customer. However, GST applies if the distributor charges the manufacturer for parts or services, and the manufacturer may claim ITC. The circular also clarifies treatment of scenarios involving stock used by distributors, credit notes, and repair service billing. Extended warranty sold at the time of original supply forms part of the composite supply of goods, while extended warranty purchased later is treated as a separate taxable supply based on its nature.