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TMI BlogClarification on taxability of salvage/ wreck value earmarked in the claim assessment of the damage caused to the motor vehicle -reg.X X X X Extracts X X X X X X X X Extracts X X X X ..... the motor vehicle -reg. The insurance companies, which are engaged in providing general insurance services in respect of insurance of motor vehicles, insure the cost of repairs/ damages of motor vehicles incurred by the policyholders. Such damages to the insured vehicle are classified in two categories: i. Total Loss/ Constructive Total Loss or Cash Loss; and ii. Partial Loss Situation 1.1 Representations have been received from the trade and field formations seeking clarification as to whether in case of motor vehicle insurance, GST is payable by the insurance company on salvage/ wreckage value earmarked in the claim assessment of the damage caused to the motor vehicle. 2. In order to clarify the issue and to ensure uniformity in the imple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pre-decided and mutually agreed by the insured and the insurer while signing the insurance contract. In cases where as per the policy contract, the insurance company s liability to pay the insured is limited to Insured s Declared Value (IDV) of the vehicle less the value of salvage/ wreck in cases of total loss to the vehicle, if the insurance claim is settled by the insurance company as per the terms of the insurance contract by deducting value of salvage/ wreckage from the claim settlement amount, the salvage/ wreckage does not become property of insurance company, and the ownership for such wreckage/ salvage remains with the insured. However, in some cases, the insurance company may support sourcing of competitive quotes from various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where due to the conditions mentioned in the contract itself, general insurance companies are deducting the value of salvage as deductibles from the claim amount, the salvage remains the property of insured and insurance companies are not liable to discharge GST liability on the same. However, in cases, where the insurance claim is settled on full claim amount, without deduction of value of salvage/ wreckage (as per the terms of the contract), the salvage becomes the property of the insurance company and the insurance company will be obligated to discharge GST on supply of salvage to the salvage buyer. 3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular. 4. Difficulty, if any, in implem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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