ITC Entitlement for Motor Vehicle Repair Expenses in Insurance Reimbursement Claims

Last updated: 28 June 2024

Notice Date : 26 June 2024

Quick Summary

This notification clarifies the entitlement of Input Tax Credit (ITC) for insurance companies regarding motor vehicle repair expenses. It explains that under both cashless and reimbursement claim settlement modes, insurance companies can claim ITC on repair services. This applies when garages issue invoices in the insurance company's name, regardless of whether the insured pays the garage first and is then reimbursed.

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: Entitlement of ITC by the insurance companies on the expenses incurred for repair of motor vehicles in case of reimbursement mode of insurance claim settlement-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 policy holders and settle the claims in two modes i.e., Cashless or Reimbursement.

1.2 Under both modes of settlement, the insurance company accounts for repair liability (as assessed by the Surveyor/ Loss Assessor) as claim cost and is liable to make payment of approved repair charges to the garage. In both the cases, the invoices are generally issued by the garages in the name of Insurance companies. While in case of Cashless Mode, the insurance companies directly make the payment of approved repair charge to the Network Garage, in case of Reimbursement mode, the payment is first made by the Insured to the Non-Network Garage, which is subsequently reimbursed by the insurance company to the Insured, to the extent of approved repair/ claim cost. Accordingly, the insurance companies may be availing input tax credit (ITC) on the tax paid in respect of such repair services provided by the garages in Cashless Mode of claim settlement as well as in Reimbursement Mode of claim settlement on the basis of the invoices issued by the garages in their name.

For full notification please refer to the Source file

FAQ :

The notification concerns the entitlement of Input Tax Credit (ITC) for insurance companies on expenses incurred for the repair of motor vehicles in reimbursement mode insurance claims.

The two modes are Cashless and Reimbursement.

Invoices are generally issued by the garages in the name of the insurance companies.

Yes, insurance companies may be availing input tax credit (ITC) on the tax paid in respect of repair services provided by garages in the Reimbursement Mode of claim settlement, provided invoices are issued in their name.

No, the notification indicates that ITC entitlement applies to both Cashless and Reimbursement modes, based on invoices issued in the insurance company's name.