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

Company's GST ITC Unaffected by Insurance Refund; No Reversal Needed Due to Financial Credit Note Classification. A company paid 20,000 for stock insurance with a GST of 3,600 in FY 18-19, claiming the GST as input tax credit (ITC). In September 2019, the insurance company refunded 10,000 due to overpayment. The company queried whether there were GST implications or if ITC needed reversing. Respondents advised that since the GST on the refunded amount wasn't returned, ITC reversal is unnecessary. The refund is considered a financial credit note, not affecting GST liability or ITC. However, one opinion suggested reversing ITC if the supply was deemed not to have occurred, though lacking legal backing.