whether Vat is payable on Insurance Claim received for stock damaged and burnt in fire

[Esha Bal]

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.

[DR.MARIAPPAN GOVINDARAJAN]

Insurance compensation is not liable to VAT since it is not for consideration.

AI Summary

Insurance compensation not subject to VAT as it does not constitute sale; reverse input tax credit where claimed. Settlement of an insurance claim for stock damaged or destroyed in a fire does not constitute a sale or transfer of property in goods and therefore is not chargeable to VAT; any input tax credit availed on the damaged stock must be reversed.