Q. 159 Taxpayer has car capitalised in books for the purpose of profession. The said car met with accident and damage is so extensive that it has to be scrapped. The insurer has agreed to give claim of Rs 6L and also salvage value of Rs 3L (to be paid by salvage buyer directly to insured). The wdv as on 31.03.2022 of car in books is Rs 1L. Whether GST is applicable ?

Ans. Insurance compensation received Para 6 of Schedule III specifically excludes actionable claims other than lottery, betting, and gambling, from the ambit of definition of supply. It is neither supply of goods nor supply of services. In the above situation, the taxpayer would receive an insurance claim of Rs. 6 lacs from the insurance company on account of car damage. Also, right to cover insurance money falls under the definition of actionable claims. Since an insurance claim to be received by the taxpayer due to damage to the car is the actionable claim, therefore it is treated neither as the supply of goods nor supply of services, therefore it is not taxable under GST. GST on salvage value In terms of section 7, supply includes sale, transfer, barter, exchange or disposal of goods for a consideration in the course or furtherance of business. Salvage value received to be treated as supply. Therefore, it is taxable under GST. Ø Notification No. 8/2018- Central Tax Rate issued dated 25th January 2018 applicable for used and old cars, value of supply would be determined on the basis of margin prescribed in the above notification. However, this is a very subjective matter of litigation, you are required to take a detailed opinion.