The Government of Rajasthan issues Important clarification on the taxability of salvage/wreck value

The Government of Rajasthan on July 09, 2024 issued a clarification on the taxability of salvage/wreck value earmarked in the claim assessment of the damage caused to the motor vehicle.

The following clarifications have been made:

1. Insurance companies are required to charge GST on vehicle insurance services, which include repairing damaged vehicles or compensating insured persons, as these fall under the GST definition of supply.
2.   GST liability does not apply to insurance contracts where salvage value deductions are made. However, if the salvage becomes the property of the insurance company after a full claim settlement, GST must be paid when the salvage is disposed of or sold.
3.  Insurance companies are not liable for GST on salvage that remains the insured’s property when deducted as deductibles from claims. GST is applicable only when salvage becomes the property of the insurance company upon full claim settlement.

The clarifications have been made to ensure uniformity in the implementation of provisions of law across the field formations.