GST ON INSURANCE CLAIM AGAINST GOODS

[ajay chharia]

1.BUYER HAS PURCHASED THE GOODS ON EX-FACTORY TERMS AND TAKEN INSURANCE COVER FOR TRANSIT.

A. THE GOODS (PAPER) GOT WET DUE TO RAIN , THE PRICE OF PAPER REDUCE SAY FROM ₹ 50/- PER KG TO ₹ 30/- PER KG.BUYER GET THE CLAIM.HOW TO TREAT THIS CLAIM UNDER GST,WHETHER TAXABLE? THE BUYER HAS SOLD THE GOODS AT LOWER PRICE .

2.THE ENTIRE LOT GOT COMPLETELY DAMAGED AND NO RECOVERY BY BUYER,ALSO GOT INSURANCE CLAIM.HOW TO TREAT THIS CLAIM UNDER GST,WHETHER TAXABLE? IN THIS CASE BUYER HAS NOT TAKEN ITC AS PER SEC 17(5)(h)

AI Summary

GST on insurance claims: compensation for damaged goods is not taxable, GST applies on reduced sale consideration.
When goods bought ex factory are damaged in transit, GST is levied on the taxable supply of those goods at the actual sale consideration (including a reduced sale price). Insurance payments received as compensation for loss in value, particularly when paid exclusive of GST, are not themselves taxable supplies. Input tax credit cannot be recovered through the insurance claim amount and GST consequences follow the buyer's ITC position and the character of any price reduction made by the seller.