Gst

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2018 Hi,

We have Automotive Repairing Business. We have raise an Invoice of Rs 58000/- to Insurance Company and Insurance Company have paid settlement amount Rs.35000/- .

In this case we have raised Original invoice of Rs. 58000/-. But we got full and final settlement amount 35000/- .
On which amount we will pay gst?
and what about difference amount ?
how we can adjust it ?

Kindly suggest me.

Expert : Anonymous

Expert : Anonymous (Expert)

13 June 2018 You ll pay GST on the Invoice value... Ask the balance details from the Insurance Company...

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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26 July 2024 In the case of your automotive repairing business where you have raised an invoice of ₹58k to an insurance company but received a settlement amount of ₹35k the GST implications can be summarized as follows:

### GST on the Invoice

1. **GST on Invoice Amount:**
- GST should be charged on the full invoice amount of ₹58k, as this is the total amount for which you have rendered services.
- The GST amount would be calculated based on the applicable rate for automotive repair services. For automotive repair services, the GST rate is typically 18%.

2. **Example Calculation:**
- **Invoice Amount:** ₹58k
- **GST Rate:** 18%
- **GST Amount:** ₹58k × 18% = ₹10.44K
- **Total Invoice Amount Including GST:** ₹58k + ₹10.44k = ₹68.44K

### Handling the Shortfall

1. **Partial Settlement:**
- Since the insurance company has paid only ₹35k, which is less than the invoice amount of ₹58k, you should account for the shortfall in your books.
- The shortfall of ₹23k (₹58k - ₹35k) is effectively an amount that remains unpaid.

2. **Adjusting the Shortfall:**
- **Write-off the Shortfall:** If the insurance company has officially settled the amount as ₹35k and you do not expect to receive the remaining ₹23k, you may need to write off the difference in your books. This can be done by recording it as a **bad debt** or **write-off**.
- **GST Adjustment:** If the shortfall is written off, you can make an adjustment for the GST related to the unpaid amount. You will need to **reverse the GST** credit or adjust it accordingly.

**Adjustment of GST:**
- If you have already claimed input tax credit (ITC) on the full invoice amount, you may need to adjust the GST portion related to the shortfall.
- **GST on Shortfall:** For the unpaid amount of ₹23k, the GST would be ₹23k × 18% = ₹4,140.
- You may need to adjust your GST return for the GST amount on the shortfall.

### Practical Steps

1. **Issuing a Credit Note (Optional):**
- You can issue a credit note for the shortfall amount of ₹23k (if mutually agreed upon). This would help in adjusting the GST amount. The credit note should mention the reason for the reduction.

2. **Accounting Entries:**
- **Original Invoice Entry:**
- Debit: Accounts Receivable ₹58k
- Credit: Service Revenue ₹58k
- **Receipt of Payment Entry:**
- Debit: Bank ₹35k
- Credit: Accounts Receivable ₹35k
- **Write-off Entry:**
- Debit: Bad Debt/Write-off ₹23k
- Credit: Accounts Receivable ₹23k

3. **GST Adjustment Entry (if necessary):**
- **Reverse GST for Shortfall:**
- Debit: GST Output Liability ₹4,140
- Credit: GST Input Credit ₹4,140

### Conclusion

- **GST Payment:** You pay GST on the full invoice amount of ₹58K as per the original invoice.
- **Adjustment of Shortfall:** The shortfall amount of ₹23K should be written off, and you may need to adjust the GST credit related to this amount.
- **Documentation:** Ensure proper documentation of the credit note (if issued) and adjustments in your GST returns for compliance.

Consult with your tax advisor or GST consultant to ensure that all adjustments comply with current GST regulations and for precise guidance based on your specific situation.

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