The Karnataka Authority of Advance Ruling (AAR) has ruled that, Goods and Services Tax (GST) not applicable on cost of tools supplied by Original Equipment Manufacturer on free of cost basis.
The applicant is involved in the manufacture and sale of plastic moulds, press tools, jigs/fixtures/ gauges, injection moulded parts and design services, as per specific orders & requirements of their customers. The assessee submitted that the tool was either manufactured by them or supplied by the customers free of cost, for production of ‘parts’, on a returnable basis were classified under capital goods.
While allowing the petition the AAR has stated that. “The cost of tools/supplied original equipment manufacturer (OEM) on free of cost basis to an applicant is not required to be added to the value of the parts supplied by the applicant and hence the same value is not liable for GST”.