Tooling Amortisation Calculator for Auto-Component Suppliers
Compute piece-rate tooling cost recovery against Ind AS 16 amortisation. Whether the tool is OEM-funded or supplier-funded, see what you have recovered to date, what is cumulatively depreciated on the books, and the shortfall that remains exposed. Includes Section 31 GST and Section 393(1)(a) TDS treatment notes.
Enter tooling cost and programme volume
The per-part amortisation rate computes automatically from cost ÷ volume.
Add actual volume and years elapsed
Sets the recovery so far and the cumulative depreciation under Ind AS 16.
Read the shortfall and treatment notes
Positive shortfall = amortisation outrunning recovery (exposure). Negative = recovery ahead of depreciation.
Your tooling inputs
Capitalised cost: tool price + freight + duty + installation, net of trial-run recovery.
Contracted programme volume over which tooling is amortised.
Cost ÷ programme volume. Embedded in the piece price as the amortisation add-on.
Parts dispatched and invoiced so far.
Time the tool has been on the supplier's fixed-asset register.
Useful-life policy: 5 years stamping dies; 4 plastic moulds; 7 forging dies (typical).
Determines whose books carry the capitalisation and depreciation.
How to use the output
- Track the shortfall by month The shortfall is the gap between accounting cost (depreciation) and cash recovery (piece-rate). It is the early-warning indicator for under-volume programmes.
- Reconcile to the OEM ledger The OEM's count of parts received should equal the supplier's actual-volume figure. Disputes here are the most common audit query on tooling recovery.
- Trigger the volume-guarantee clause If shortfall > 30% of cost at programme end-of-life, invoke the take-or-pay or minimum-volume guarantee. Document the calculation in the claim letter.
When this gets complicated
Three things make tooling amortisation harder than the formula suggests. First, programmes are rarely single-OEM and single-platform. A stamping die for a door inner panel may serve three vehicle variants over its life, with three different volume commitments and three different per-part rates. The supplier must allocate the cost across variants on a defensible basis — usually weighted production time — and the audit will challenge the allocation if any variant under-runs.
Second, ECN (engineering change notice) costs blur the capitalisation boundary. When the OEM changes a dimension mid-programme and the supplier modifies the tool at a cost of, say, ₹8 lakh, is that capital expenditure (added to the asset and re-depreciated over remaining life) or revenue expenditure (expensed in the period)? Ind AS 16 is clear that modifications which extend useful life or capacity are capitalised; mere repairs are expensed. In practice, ECNs sit in the grey zone and become a recurring audit-query item.
Third, programme exit is messy. The OEM stops placing orders, but the tool sits on the supplier's books at written-down value. If the OEM owns the tool (free-issue), it should be returned — but freight cost and transit damage become disputes. If the supplier owns it, the residual value is typically scrap (a few percent of original cost), and the write-off hits the supplier's P&L in the exit year. A clean tooling-amortisation register tied to each programme is what makes exit accounting defensible to the auditor and the OEM.
Related
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Frequently Asked Questions
Who capitalises tooling — the supplier or the OEM? +
It depends on the contract. In an OEM-funded tooling arrangement, the OEM pays the tool maker directly (or reimburses the supplier on tooling-PO) and the tool sits on the OEM's books as a fixed asset. In a supplier-funded tooling arrangement, the supplier pays for the tool, capitalises it under Ind AS 16, and recovers the cost through a piece-rate amortisation added to the part price over the programme life. The economic logic is identical (the cost ultimately flows to the part), but the accounting and tax treatment diverges sharply. Free-issue tooling — where the OEM physically owns the tool but lends it to the supplier — is the third hybrid and is the most common arrangement for high-value dies in passenger-car programmes.
How is supplier-funded tooling amortised under Ind AS 16? +
Under Ind AS 16, the tool is capitalised at cost (including freight, duties, installation and trial-run cost net of recoveries) and depreciated over its useful life — typically 5 years for stamping dies, 4 years for plastic moulds, 7 years for forging dies, subject to the supplier's accounting policy. Useful life is NOT the programme life — if the programme runs 7 years but the asset life is 5, depreciation is over 5 years and the remaining 2 years carry zero depreciation. The piece-rate recovery (the amortisation added to the part price) is recognised as revenue per unit dispatched. Mismatch between depreciation rate and recovery rate creates a P&L timing gap, which is the most common audit query on tooling.
What GST applies to tooling amortisation? +
The piece-rate amortisation charged on each part invoice is part of the transaction value under Section 15 of CGST Act and attracts GST at the rate applicable to the part (typically 28% under HSN 8708). It is NOT a separate service — it is consideration for the goods supplied. If the supplier separately invoices the tooling itself to the OEM (in a sale-and-lease-back style arrangement), Section 31 governs the invoice and ITC under Rule 43 applies to the OEM over 60 months for the capital-goods ITC. The OEM-funded model with tool-on-OEM-books generates a one-time supply of capital goods at the tool maker layer, with subsequent piece-rate amortisation being zero on the part invoice.
What TDS treatment applies to piece-rate tooling amortisation? +
Where the OEM contractually treats the piece-rate tooling amortisation as a job-work conversion charge (rather than as goods consideration), TDS under Section 393(1)(a) of the Income-tax Act 2025 (payment code 1002, the new code for contractual job-work payments, successor to legacy Section 194C) is deducted at 1% if the supplier is an individual or HUF and 2% otherwise. Where the amortisation is treated as part of the goods price (the normal default), no TDS applies to the goods component — TDS on goods purchase is governed by Section 394 (legacy Section 194Q) at 0.1% above the ₹50 lakh threshold. The contract drafting determines the classification; the calculator above flags both possibilities so the supplier can verify their books match the OEM's treatment.
What happens when actual volume falls short of programme volume? +
This is the central recovery risk. If the contract amortises ₹50 lakh of tooling over a programme volume of 5,00,000 parts at ₹10/part, but actual volume is only 3,00,000 parts when the programme ends, the supplier has recovered ₹30 lakh against a tooling cost of ₹50 lakh — a ₹20 lakh shortfall. Most well-drafted contracts include a minimum-volume guarantee or a take-or-pay clause that triggers a lump-sum balancing payment from the OEM at programme exit. Where the contract has no such guarantee, the unrecovered tooling cost is an impairment loss under Ind AS 36 in the supplier's books, often discovered only at programme end. The shortfall line in the calculator above is the audit-trail number.
Reconcile tooling recovery to depreciation, every month, every programme
TransactIG tracks per-programme tooling registers — capitalised cost, depreciation, recovered-to-date, and shortfall — with a clean audit trail tied to OEM dispatch ledgers.