Mold cost invoice in GST return

The supply of a mould that stays in India does not qualify as a "deemed export" or an "export of goods" under GST law. Because the goods remain within India, the transaction is treated as a domestic supply, and GST is applicable. Failing to charge GST on this invoice poses a high risk of tax demands, interest, and penalties. You should immediately consult a tax professional to rectify the tax treatment and review your contract documentation.

ear Sir,

Thank you for your response.

We would like to clarify that the mould is our own property and not that of the foreign buyer.

We have incurred mould development/manufacturing cost in India, and we intend to recover this cost from the foreign buyer.

Kindly advise what would be the appropriate invoicing treatment in this case—whether it should be treated as export of service (e.g., tooling / NRE charges) under LUT, or included in the export product invoice.

We request your guidance on the correct GST classification and invoice structure for this recovery.

The GST treatment of mould cost recovery from a foreign customer depends on how the transaction is structured.

Scenario 1: Mould stays in India, no physical export of mould: The cost recovery for a mould that remains in India is likely to be treated as consideration for a service (tool/mould development service) rendered to a foreign customer. This can qualify as an export of service under Section 2(6) of the IGST Act if all four conditions are met:

• The supplier is in India
• The recipient is outside India
• The place of supply is outside India
• Payment is received in convertible foreign exchange

If these conditions are satisfied, the mould recovery qualifies as export of service and can be invoiced under LUT (zero-rated, no GST) or with IGST (for refund).

Scenario 2: Mould is physically exported to the foreign customer: This would be an export of goods. Zero-rated supply under IGST Act. Either export under LUT or with IGST and claim refund.

Scenario 3: Mould is used in India to manufacture goods for the foreign customer and the cost is built into the product price: In this case, there is no separate supply of the mould. The cost is embedded in the manufactured goods, which are exported. Zero-rated at the goods level.

If the mould cost is being recovered as a separate charge on an invoice, you need to determine: is there a distinct supply of the mould or its use? If yes, classify it as export of service/goods. If it is purely a reimbursement of costs (no mark-up, documented as cost sharing), it may be argued as a non-supply, but this is risky without clear documentation.

Given the significant GST and refund implications, getting a formal opinion on this specific arrangement is worth it. Our GST team at Tax Garden has handled several similar export-related classification issues: taxgarden.in/services/gst