Car Insurance and GST

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This query is : Resolved

Quick Summary

If your company car, purchased with GST benefits, was written off and you received an insurance settlement, your auditor may be correct that you need to pay GST on the payout. While the insurance settlement might be considered an actionable claim under Schedule 3 of the GST Act, meaning no GST is directly payable on the settlement itself, you likely need to reverse the Input Tax Credit (ITC) you initially claimed on the car's purchase.

meenakshi somasundaram

meenakshi somasundaram (Querist)

06 September 2023 I bought a car in my company's name in July 11/2022. Availed GST.
Unfortunately, the car was totally damaged when it met with an accident in December 2022.
I claimed insurance and Reliance Insurance settled me fully in March 2022.
My auditor says I made a profit of RS 4,51, 432,55 ad asks me to pay GST.
I do not consider this as profit. Like to know whether I have to record.
Need your direction asap.

RAJA P M

RAJA P M (Expert)

06 September 2023 Yes, Your auditor is correct in this Issue.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 September 2023 Reverse ITC claimed on the car as you got insurance settlement including GST on the car.

PAWAN KUMAR

PAWAN KUMAR (Expert)

06 September 2023 As per my view, the insurance amount received in lieu of damaged of the car during accident is a actionable claim and is as per schedule 3 GST act, No GST is payable. Since at the time of purchase you availed ITC, this need to reverse as per my view.

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