GST on damaged machinery

[KARAN VERMA]

Sir, there is fire in factory and some machineries are damaged.

5 machines purchased before GST and 3 machines purchased after GST.

What will be tax implication if I received compensation from insurance co.

Whether I need to reverse input credit on machinery purchased in Excise and GST regime.

[Shilpi Jain]

GST will not be applicable on the insurance claim received.

In case no credit is transitioned in to GST relating to the machinery purchased during Excise regime, credit reversal will not be required.

W.r.t. the machinery purchased in GST regime reversal of credit would be required.

However. in case machinery can fetch any scrap value on sale then no credit reversal would be required.

[KARAN VERMA]

Thank you madam, I m satisfied with yout all above views.

But in last, if we realised any scrap value, then why not input reversal required.

[KASTURI SETHI]

If you have taken credit, you will clear scrap of machinery on payment duty. If credit has not been, duty already paid at the time of purchase of machinery.

[Ganeshan Kalyani]

ITC to be reversed u/s 17(5) - (h) goods lost, stolen, destroyed, written off or disposed. And, there is no GST on insurance claim.

AI Summary

Input tax credit reversal required where machinery destroyed; insurance proceeds are not subject to GST under law. Insurance proceeds in respect of destroyed machinery are not subject to GST. No reversal of input tax credit is required for machines acquired pre-GST if no transitional credit was availed. For machines purchased under GST where input tax credit was claimed, input tax credit reversal is required for goods destroyed, lost, or written off. Realisation of scrap value can obviate or adjust the need for reversal; where credit was taken, scrap must be cleared on payment of duty.