The Government of Rajasthan issued a clarification on July 9, 2024, addressing the entitlement of Input Tax Credit (ITC) by insurance companies on expenses incurred for the repair of motor vehicles under the reimbursement mode of insurance claim settlement.
The Key Points:
- ITC Entitlement for Insurance Companies:
- Insurance companies are entitled to claim ITC on repair invoices, regardless of whether the payment is first made by the insured and then reimbursed by the insurance companies. The ultimate liability for the approved repair cost lies with the insurance companies, making them the RECIPIENT of the service.
- Invoices from Non-Network Garages:
- Separate Invoices: If a garage issues two separate invoices (one to the insurance company for the approved claim cost and another to the customer for any excess amount), ITC will be available to insurance companies only on the first invoice, subject to the reimbursement of the approved amount.
- Consolidated Invoices: If a single invoice for the full repair amount is issued to the insurance company, ITC will be restricted to the reimbursement amount of the approved claim cost, not the full invoice value.
- Invoices Not Issued in the Name of Insurance Companies:
- If the invoice for repair expenses is not issued in the name of the insurance companies, ITC will not be available to them. This is because the conditions under Section 16(a) and (aa) of the Rajasthan Goods and Services Tax (RGST) Act will not be met:
- Section 16(a): A registered person must have a tax invoice or debit note issued by a registered supplier or other prescribed tax-paying documents.
- Section 16(aa): The details of such invoices or debit notes must be furnished by the supplier in their statement of outward supplies and communicated to the recipient.
This clarification aims to ensure uniformity in the implementation of ITC provisions across different field formations.
