GST on insurance claim received

[KARAN VERMA]

Sir, motor vehilce car is damaged during accident.

Now, insurance company gave ₹ 3 lakhs as compensation. Whether assesse is required to pay any GST on insurance claim received ?

Further, beside insurance claim, car is old for ₹ 50,000 as scrap to buyer. There is loss on sale of car ₹ 2 lakhs as per Income tax Act. Whether assesee required to pay GST on car sale ?

[KASTURI SETHI]

Compensation is not income and hence not consideration.

Sale of old and used car as scrap is subject to GST.

[KARAN VERMA]

It means whatever compensation received from insurance company for damage of vehicle is exempt from GST.

Kindly provide any notification or rule.

[KASTURI SETHI]

Every kind of compensation amount is NOT NON-TAXABLE. You will have to examine each and every case. Go deep into the definition of 'Supply' and 'Consideration' under GST. Also literal and legal meaning of the word, 'compensation'. You will not find direct and clear cut any authority on this issue.

[Ganeshan Kalyani]

GST is not applicable on compensation received from insurance company.

[KARAN VERMA]

Sir

Whether we can say that insurance claim is actionable claim which is outside the purview of GST as per Schedule-III. Here are some examples of Actionable claim-

1. Claim for arrear rent.

2. Claim for rent to fall due in future.

3. A choice offered to repurchase the property once again.

4. Book debts or claims

5. The right to claims maintenance.

6. Claim the benefit of the contract.

7. Deposit receipt.

[KASTURI SETHI]

Yes. Insurance claim is actionable claim. I agree with you.

[KARAN VERMA]

Thank you sir for your views.

AI Summary

GST Exempt on Insurance Compensation, But Sale of Damaged Vehicle as Scrap is Taxable Under GST Rules A discussion on a forum addressed whether GST applies to insurance claims and the sale of a damaged vehicle. An individual queried if GST is payable on a 3 lakh insurance compensation for a damaged car and its subsequent sale as scrap for 50,000, despite a 2 lakh loss per the Income Tax Act. Responses clarified that insurance compensation is generally exempt from GST as it is not considered income or consideration. However, the sale of the car as scrap is subject to GST. It was noted that insurance claims are actionable claims, thus outside GST's purview.