![ITC On Repair Of Motor Vehicle Can Be Claimed : GST Circular [ Update]](https://avenueconsultants.in/wp-content/uploads/2024/06/Your-title-here-1.png)
On June 26, 2024, the Central Board of Indirect Taxes and Customs (CBIC) released circular, 217/11/2024-GST, providing critical clarification on Input Tax Credit (ITC) for motor vehicle repairs by insurance companies.
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Key Highlights
Insurance companies, offering general insurance services for motor vehicles, often cover repair costs for policyholders and settle claims either through a Cashless mode or a Reimbursement mode.
Insurance companies have raised concerns that in the reimbursement mode, some field formations object to ITC claims on repair invoices issued by non-network garages. The argument is that these garages do not offer credit facilities to insurance companies, meaning the repair services are provided to the insured, not the insurer, thus disqualifying ITC for the insurance companies.
Clarification
When garages issue repair invoices in the name of the insurance company and the policyholder makes the payment, the insurance company later reimburses the approved claim.
Regardless of who pays the garages (insured or insurance company), if the repair invoice is in the insurance company’s name, the insurance company is considered the recipient of the service and is eligible to claim ITC.
CBIC Circular 217/11/2024-GST Dated 26th June 2024
You can download CBIC circular 217/11/2024-GST Dated 26th June 2024 from here.
FAQ’s
What is Circular-No-217-11-2024?
CBIC Circular No. 217-11-2024 dated 26 June, 2024, clarified that insurance companies that cover repair costs for motor vehicles and settle claims through reimbursement are eligible to claim ITC if the invoice is issued in the name of the insurance company, regardless of whether the payment to the garages is made by the insured or the insurance company.
Whether ITC is available to the insurer where the invoice for the repair of the vehicle is not in name of the insurance company ?
In this scenario, the conditions specified in clause (a) and (aa) of section 16(2) of the CGST Act are not met. Consequently, the insurance company will not be able to claim input tax credit for the invoice.
Is ITC available to the insurer when the garage’s invoice includes amounts exceeding the approved claim cost and excess amount paid by Insured?
If the garage issues two separate invoices for the repair services—one to the insurance company for the approved claim cost and another to the customer for the excess amount—the insurance company may claim ITC on the invoice issued to it, provided it reimburses the customer. However, if the garage issues a single invoice to the insurance company for the full repair cost and the insurer reimburses only the approved claim amount, the ITC for the insurance company is limited to the reimbursed amount, not the full invoice value.