Development charges

This query is : Resolved

Kaustubh Ram Karandikar (Querist)
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11 December 2018 XYZ is the manufacturer of Product ‘A’ which attracts 12% GST. To manufacture this product, they require Blocks, Punches etc. which they get it done from outside. XYZ recovers this amount of developing the blocks and punches from the customer through tax invoice issued for Product ‘A’ but shows it separately as ‘Development charges’ for making blocks and punches. 1) Can XYZ charge the same GST which is applicable for product ‘A’ in respect of development charges recovered or 2) Need to issue a separate service invoice for development charges and charge the applicable GST?

CA. Vivek Chiraniya

CA. Vivek Chiraniya (Expert)
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21 December 2018 1) XYZ should charge the same rate of GST. Development activity is liable to be treated as a composite supply wherein the Principle supply is Product 'A'.
2) Instead of issuing separate invoice, he should issue a Debit Note or a Supplementary Invoice (linking it with the principal invoice).