Gst applicability on product development cost

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MANOJ GUPTA (Querist)
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06 May 2019 Dear Sir,

We are in the business of Product development which involves Tooling Development Cost , where Development cost is paid by our buyers on satisfactory Performance of Product.

Sir, during the VAT regime there was no Tax Applicable on Tooling Development cost,while in the GST period no Invoice can be raised without charging GST.

Sir, since the Purchase Order is from the Govt Deptt and of VAT period our Buyers are saying that we cannot charge Tax on Development Cost, while we are Told by GST Dett that no GST Invoice can be raized without charging GST on the Development Cost.

Kindly give your valued advice as to under which section of GST we can charge TAX and oblige.

CA Anita Bhadra

CA Anita Bhadra (Expert)
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06 May 2019 In my view , section 15 of CGST Act is applicable in this case .

As per Sec 15 ( c) of CGST Act incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services “is to be added to transaction value for the purpose of GST calculation

Designing Charges & Tooling Cost Reimbursed by the Customers is part of ‘Sales Turnover’ under Bombay Sales Tax Act: Bombay HC.

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