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can take input tax credit of GST on insurance premium ?

22 September 2017

I am proprietor of my business. I have many assets in business wherein car is also an asset. I have taken insurance cover of that vehcle. I have paid insurance premium in which GST is also part of total premium can I take input tax credit of said GST.

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12 Replies

mayank goel (Student CA Final) (72 Points)
Replied 22 September 2017

Yes input is allowed

Anupam Goswami (342 Points)
Replied 23 September 2017

u can take service charge part for the insurance....non to premium whole amount...

GANGA SINGH YADAV (12 Points)
Replied 24 September 2017

but credit in relation to motor vehicle is ineligible ITC. how to prove your answer.

RAMESH KUMAR SINGLA (PROFESSIONAL) (1777 Points)
Replied 24 September 2017

The question here regarding availment of credit on insurance premium paid on the care which admittedly is being used in the business. The question does not pertain to availment of credit of tax paid on car (motor vehicle) per se. The first condition for availing credit is that the supply of goods/services is used or intended to be used in the course or in furtherance of business. The supply of insurance service in respect of car, made to you, appears to be in furtherance of business since the car as claimed by you is used for business purposes. Here the insurance of car is comparable with insurance of any other business item like machinery etc. used for production (business).

However, section 17(5) imposes restrictions. The restrictions in section 17(5)(a) would be applicable when the question is regarding availment of credit of tax paid on purchase of car. In the present case, as mentioned above, the question does not pertain to availment of credit on tax paid on car. Therefore, in my view, the credit should be admissible.

Ashok Mishra (Audit Manager) (22 Points)
Replied 26 February 2018

"IN RELATION" HAS NOT BEEN DEFINED IN GST ACT. "IN RELATION" IS, IN COMMON PARLANCE , USED FOR "IN CONNECTION WITH" THAT IS WIDER TERM AND THEREFORE IT WILL NOT ONLY COVER MOTOR VEHICLE BUT OTHER SERVICES IN CONNECTION WITH MOTOR VEHICLE ALSO. THUS EVEN ITC ON CAR INSURANCE AS A SERVICE IN CONNECTION WITH CAR WILL ALSO BE DISALLOWED U/S 17(5).

ON THE OTHER HAND, WHEN ANYTHING ("IN RELATION OF") IS NOT SPECIFICALLY DEFINED, ONE MAY TAKE BENIFIT IN HIS/HER FAVOUR AS A TAX PAYER AND ONE MAY TAKE ITC ON CAR INSURANCE.

AS A TAXPAYER I WOULD GO FOR AVAILING THE CREDIT

MOTOR VEHICLE & OTHER CONVEYENCES:

1. PURCHASE - ITC NOT ALLOWED

2. REPAIR/INSURANCE/PARKING - ITC ALLOWED

3. HIRE OF CAR(4 WHEELER) - ITC NOT ALLOWED AS COVERED IN "RENT A CAB"

4. LEASE OF CAR - ITC NOT ALLOWED (SUBTANCE OF FINANCE LEASE IS AS IF PURCHASE CASE)

5. FUEL/ TOLL TAX - N/A AS NOT SUBJECT TO TAX

dipanshu (accountant) (37 Points)
Replied 24 May 2018

What about gst on health insurance and can u explain it where we show it

RAHUL KALAIVASAN (ACCOUNTANT) (2 Points)
Replied 02 June 2018

If one have paid Fire insurance premium including 18% GST which covers the assets inclding factory building, office building, machineries and a Car, Is it alowed to take claim of the GST paid on premium as IPT?

And also what about the GST on the premium paid for Insurance of Loss of Profit?

Mitesh Chheda (Practise) (31 Points)
Replied 07 June 2018

ITC is not available for health insurance and life insurance. However, ITC on insurance for business assets is available.

Kartikey Jain (Intern) (2377 Points)
Replied 04 July 2018

CGST Act specifically states that no ITC shall be available for personal insurances like life insurance & health insurance since these expenditures are not for the furtherance of business. However, businesses may take ITC for Fire insurance taken for the assets of the business.

Now coming to ITC on motor insurance and repairs, there is no clarity on this matter as Sec 17(5) of CGST Act specifically excludes Motor vehicles. In the previous regime, these expenses were ineligible for availment of credit. However, due to lack of clarity, most assessees can taking up ITC on motor insurance and repairs as of now. Hope, department comes up with a circular or notification on this matter at the earliest.

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