Sales tax on Warranty Replacement

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 February 2011 Dear Sir,

We have establishment in Karnataka.We are under KVAT.

We are selling Stabilizers, we are giving 3 years warranty.

We are doing free replacement of spares during warranty period.

We are taking credit on the spares purchased and we are not paying tax to the govt on free replacement

Our contention is that when we sold Stablilizers the cost of warranty was also considered and selling price was arrived and Tax was paid on sales invoice. Hence paying tax again does not arise.

At the same time it is not a sale as we are not receiving consideration, hence paying tax does not arise.

But, Sales tax department has refused our argument and asked us to pay tax for all the warranty replacement.

Kindly let me, whether sales tax department is right in their contention.

If wrong kindly provide me the notification number or judgement details in this regard,so that we can defend ourselves

CA Mohan Agarwal

CA Mohan Agarwal (Expert)
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31 May 2013 Dear Sir, In Mohd Ekram Khan & Sons Vs Commissioner of Taxes, UP, judgment has been given that VAT shall have to paid on the consideration received by the assessee from the manufacturer by issuing debit notes to them.