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

Insurance compensation often qualifies as an actionable claim outside GST, while scrap sale of a vehicle attracts GST. Compensation received from an insurer for vehicle damage is not automatically taxable GST consideration and is often characterised as an actionable claim outside taxable supply, but each receipt must be tested against the Supply and Consideration concepts to determine taxability. The sale of the damaged vehicle as scrap constitutes a supply of goods and is subject to GST regardless of any loss for income-tax purposes.