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

Fire Damages Factory: GST Not Applied on Insurance Claims; Input Tax Credit Reversal Rules Explained Under Section 17(5)(h) A fire damaged several machines in a factory, prompting a query about the GST implications on insurance compensation and input credit reversal. Machines were purchased both before and after the GST implementation. Responses clarified that GST is not applicable on insurance claims. For machines bought under the Excise regime, no credit reversal is needed if no credit was transitioned. For those purchased under the GST regime, credit reversal is required unless the machinery has scrap value. Input Tax Credit (ITC) must be reversed for goods lost or destroyed, as per section 17(5)(h), and duty is paid when clearing scrap.