Clarification on taxability of wreck and salvage values in motor insurance claims

Last updated: 27 June 2024

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This notification clarifies the Goods and Services Tax (GST) treatment for salvage or wreck values in motor insurance claims. It addresses queries from the trade and tax authorities regarding whether insurance companies need to pay GST on the salvage/wreckage value when assessing damages to insured motor vehicles. The clarification covers both total loss and partial loss situations.

F.No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****

North Block, New Delhi
Dated the 26th June, 2024

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification on taxability of salvage/ wreck value earmarked in the claim assessment of the damage caused to the motor vehicle -reg.

The insurance companies, which are engaged in providing general insurance services in respect of insurance of motor vehicles, insure the cost of repairs/ damages of motor vehicles incurred by the policyholders. Such damages to the insured vehicle are classified in two categories:

i. Total Loss/ Constructive Total Loss or Cash Loss; and

ii. Partial Loss Situation

1.1 Representations have been received from the trade and field formations seeking clarification as to whether in case of motor vehicle insurance, GST is payable by the insurance company on salvage/ wreckage value earmarked in the claim assessment of the damage caused to the motor vehicle.

For full notification please refer to the attachment.

FAQ :

The notification clarifies the taxability of salvage or wreck values in motor insurance claims under GST.

It is addressed to the Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/Commissioners of Central Tax and Principal Directors General/Directors General.

The damages are classified into Total Loss/Constructive Total Loss or Cash Loss, and Partial Loss.

The clarification concerns the salvage/wreckage value earmarked in the claim assessment for damages to a motor vehicle.

Yes, representations have been received from the trade and field formations seeking this clarification.