Material Return back & insurance co.

[POLYPLEX CORPORATIONLTD]

We had taken ITC on R/M @ 18% and dispatch finished goods to customer. In transit, the goods was damaged and return to plant and we issue credit note and reverse our Output Tax Liability. After survey by insurance company it was decided to sale these goods as it is on scrap @ 5%. Now we pay GST @ 5% on scrap value. and the Rest amount received us without GST from insurance company after deduction as per insurance policy.

Question :-1 . Whether we have reverse credit taken on Raw Material ? If yes How much i.e. on Scrap Qty. or balance Qty. or proportionate Amount received from Insurance Co. ?

2. Whether money received from Insurance Company liable to GST?

AI Summary

Input tax credit reversal not required where damaged goods are sold as scrap; insurance compensation not subject to GST.
Input tax credit reversal is not required when damaged raw materials returned to plant are sold as scrap; the disposal limitation does not apply where goods remain available and are sold. GST is payable on the scrap sale at the applicable rate. Insurance compensation received for damage is not consideration for a supply by the claimant and is not subject to GST; the insurance company's indemnity service is the relevant taxable act for the insurer.