re itc gst insurance

[Madhavan iyengar]

A company has paid for stock insurance ₹ 20000/- GST is ₹ 3600/- in FY 18-19 and claimed credit in return of ₹ 3600/-

In sept 19 the insurance company refunded ₹ 10000/- being excess collected

Query:

since company will book ₹ 10000 as misc income whether any gst implication on same

and whether ITC is required to be reversed

[Rajagopalan Ranganathan]

Sir,

While refunding excess premium paid the Insurance Company did not refund the corresponding gst paid on ₹ 10,000/-. ₹ 3600/- paid as gst earlier stands as it is. Therefore no reversal of ITC at your end is required. This ia my opinion.

[Ganeshan Kalyani]

In GST the supplier has to charge GST on the credit note. That is when the insurance company returned you the excess money then it would have issued you a credit note. If the credit note is without GST then the credit note is merely a financial credit note and therefore reversal of input tax credit is not warranted. Also, there is no liability to pay gst on such income

[Ganeshan Kalyani]

In fact , it is not an income. It is a adjustment to the original supply.

[Atul Rathod]

I think to the extent supply its self not happened therefore ITC needs to be reversed based on treating the said amount on inclusive basis. (Proviso to Sec 16 would apply)

However if it is financial credit note -then not required as outward is not reduced by insurance company and ITC not required to be reversed by company.-Though there is no legal back up.

AI Summary

Input Tax Credit reversal may not be required where a supplier issues a financial credit note without GST.
Whether reversal of input tax credit arises when an insurer refunds excess premium but does not refund the corresponding GST. If the insurer issues a financial credit note without GST the refund is an adjustment to the original supply and reversal of ITC is not required; if a credit note carries GST the supplier must account for GST on that credit note. A contrary position suggests the entitlement proviso could require reversal if the supply is treated as not having occurred.