Clarification on GST Liability for Motor Vehicle Insurance Salvage

Insurance Services for Motor Vehicles: Insurance companies cover repair costs or damages for motor vehicles. Total Loss vs. Partial Loss: Damages are classified as either total loss/constructive total loss or partial loss.

GST on Salvage Value: Clarification needed on whether insurance companies must pay GST on salvage value in damage assessments. Definition of Supply: Section 7 of the CGST Act defines supply as all forms of goods or services provided for a consideration in business.

Deductibles and Salvage Ownership: Deductibles are agreed upon in the insurance contract. Salvage remains with the insured unless the claim is settled without deducting salvage value. No GST Liability: If the insurance company deducts salvage value from the claim, ownership stays with the insured, and the company has no GST liability.

Full IDV Claims: If the claim is settled for the full Insured Declared Value (IDV) without deducting salvage value, the insurance company owns the salvage and must pay GST when disposing of it. Conclusion: Insurance companies must discharge GST on salvage only if they own it after settling the full IDV claim. Otherwise, the insured retains ownership, and the insurance company has no GST liability.