Annual maint. contract under gst

Gagan Singla (564 Points)

02 May 2019  
AMC - ANNUAL MAINTENANCE CONTRACT            
THE COMPANY MAKES A CONTRACT WITH IT'S CUSTOMERS TO PROVIDE AMC SERVICES WHICH INCLUDES PROPER TAKE CARE OF IT'S MACHINES & ALL OR SPECIFIED PARTS OF THE MACHINES WILL BE REPLACES AT FREE OF COST IF THEY GOT DAMAGED DURING THE AMC PERIOD.         
                     
THE AMC SALE BILL IS ISSUED FOR THE AMOUNT AS CONTRACTED        
THE GST RATE - 18% IF ALL PARTS RATED AT 18%, IF PARTS ARE OF 28% THEN AMC -28% & SAC CODE- 9987  
                     
NOW:-                    
IF SOME PARTS TO BE SENT TO CUSTOMER UNDER AMC CONTRACT:-        
                     
1. SERIES-SUAMC/1 - FOR PARTS TO BE SENT UNDER AMC          
 - ALL THE PARTS TO BE SENT ON INVOICE COVER UNDER ABOVE SERIES        
 - THE SALES VALUE TO BE ZERO              
 - NO GST PAYABLE ON OUTPUT              
 - NO GST TO BE REVERSED, AS WHEN AMC IS SOLD TO CUSTOMER, GST HAS BEEN PAID ON OUTPUT OF AMC CHARGES
 - CUSTOMER WILL GET GST INPUT CREDIT OF AMC CHARGES ONLY        
 - CUSTOMER WILL NOT GET GST INPUT CREDIT OF PARTS THAT ARE SUBSEQUENTLY SENT DURING AMC PERIOD AS THESE ARE ZERO VALUE SUPPLY, CUSTOMER HAS NOT PAID DIRECT CONSIDERATION AGAINST SUCH REPLACEMENTS
 - SELLER WILL GET INPUT CREDIT OF ALL PARTS THAT ARE SENT DURING AMC PERIOD TO CUSTOMERS  
                     
2. ACCOUNTING TREATMENT                
 - MATERIAL ISSUE NOTE TO BE MADE FOR PARTS TO SENT ON WARRANTY      
 - JOURNAL ENTRY                  
 - AMC Service Exp. Debit                
    To Purchase Respective Goods              
(Reference to MIN-XXX, AMC goods accounted & ref. to SUAMC/1)        
                     
A point to be noted that if parts are replaced, then what is done with the old parts. They have to be also properly
accounted in books of accounts:-              
                     
Case 1:- If thet are sold as scrap, then they should be issued as sales invoice & tax to be paid on such sale  
                     
Case 2: If thet are repaired, then proper matrial inward note to be made & then repair expenses to be accounted through proper purchase bill
 - they should be taken in stock              
                     
Case 3 :- If they are thrown in garbage, then also proper note should be availabe so that proper inventory entry should be passes in records.