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 SUMMARY OF ADVANCE RULING
 Name of the Parties
M/S. LEAR AUTOMOTIVE INDIA PRIVATE LIMITED (AAR Maharashtra)

Ruling 
Facts: The Applicant manufactures automotive seats for various customers, such as Ford Motor Private Limited, Volkswagen India Private Limited, M/S Mahindra & Mahindra Ltd, General Motors, etc. by using tools/ moulds either provided by them or owned by them. Generally, the Applicant gets the tool manufactured from third party manufacturer as per the requirements of the customer. Thereafter the property in the said tool gets transferred from third party manufacturer to the Applicant and from the Applicant to the customer. Though the property in tool gets transferred to the customer eventually, the possession remains with the Applicant and it uses the same to manufacture the products as per the requirement of the customers.

For manufacture of the said tool, the customers give tooling advance to the said third-party manufacturer. Thereafter, the tool is developed and invoice is raised on the customer. The third-party manufacturer manufactures parts by using above tools and supplies the said parts to the Applicant. The Applicant makes the payment to third party manufacturer for components supplied. In above scenario, the third-party manufacturer may include Tool amortization value in components supplied to the Applicant.

Issue:
Whether the amortized value of the tool cost which are provided/ supplied on FOC basis by the customer needs to be added to the value of the final goods supplied to the customers under the GST laws?

Held:
The goods owned by the OEM that are provided to a component manufacturer on FOC basis do not constitute supply as there is no consideration. The Board further clarified that the value of goods provided on FOC basis shall not be added to the value of supply of components. However, the case is different where the contractual obligation is cast upon the component manufacturer to provide moulds/ dies but the same have been supplied by OEM on FOC basis and in such cases, the amortised cost of such moulds and dies shall be added to the value of supply of component. 

Once it is established that the obligation to provide tools on FOC basis is on the customer then the question of adding the amortised value of tools supplied by the customer does not arise. However, the situation is reverse where the obligation to use tools is on the applicant but provision for the same is made by the OEM on FOC basis. 

The amortized value of the tool received on FOC basis from the customer is not required to be included in the value of finished goods manufactured and supplied by the applicant to the customer.