This circular provides clarification on GST liability and input tax credit (ITC) in cases related to warranty and extended warranty, furthering Circular No. 195/07/2023-GST dated 17.07.2023.

It clarifies that the earlier provisions regarding replacement of parts under warranty also apply when goods as a whole are replaced. Similarly, when a distributor replaces goods or parts from his own stock under warranty on behalf of the manufacturer and later receives replenishment from the manufacturer without consideration, no GST is payable on such replenishment, and no ITC reversal is required.

The circular also distinguishes extended warranty transactions. When the supplier of extended warranty is different from the goods supplier (such as a manufacturer or third party), the extended warranty is treated as a separate supply of services and not part of the original composite supply of goods. Further, if extended warranty is sold after the original sale, it is considered a distinct supply of services liable to GST accordingly.