VAT is payable only in respect of consideration received on transfer of property in goods viz. 'sale' as defined under the VAT Act. Settlement of insurance claim by the insurance company cannot said to be transfer of ownership and thus no VAT is payable. However any input tax credit availed in respect of the stock damaged should be reversed.
CAN I HAVE THE RELEVANT SECTION OR CASE LAWS FOR THE SAME.
VAT Not Payable on Insurance Claims for Fire-Damaged Stock; Input Tax Credit Reversal Required Under VAT Act A discussion forum addressed whether VAT is payable on insurance claims for stock damaged by fire. It was clarified that VAT applies only to the transfer of goods ownership, as defined under the VAT Act, and not to insurance settlements, which do not constitute a sale. Therefore, no VAT is payable on such claims. However, any input tax credit previously claimed on the damaged stock should be reversed. The query sought relevant legal sections or case laws, and the response confirmed that insurance compensation is not subject to VAT since it does not involve consideration. (AI Summary)
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