Circular No.: 217/11/2024-GST
Date of Circular: 26th June 2024
Relevant Sections and Rules:
- CGST Act, 2017:
- Section 16(2)(a) and (aa): Conditions for availing ITC
- Section 17(5): Blocked credit—exceptions for general insurance
- Section 2(31): Definition of consideration
- Section 2(93): Definition of recipient
- Section 168(1): Power to issue instructions
Summary of Clarifications Provided:
- Availability of ITC on Repair Expenses in Reimbursement Mode of Motor Vehicle Insurance Claims:
Insurance companies settling motor vehicle claims via reimbursement mode may avail ITC on repair services, even when the insured pays upfront and gets reimbursed later, provided:
- The invoice is in the name of the insurance company.
- The insurance company bears the liability for the approved claim cost.
As per Sections 2(31) and 2(93) of CGST Act, the insurer qualifies as the recipient of services and makes the payment (via reimbursement), satisfying the conditions of Section 16.
Since Section 17(5) allows ITC to insurers for vehicle repair services (for insured vehicles), no restriction applies.
- ITC Where Repair Invoice Includes Excess Amount Beyond Approved Claim Cost:
If the garage issues:
- Two separate invoices: One for the approved claim amount (to the insurer) and one for excess charges (to the insured):
➤ ITC is allowed only on the insurer’s invoice, if the amount is reimbursed. - One combined invoice to the insurer but the insurer reimburses only part of the amount:
➤ ITC is restricted only to the extent of reimbursement (i.e., approved claim cost), not the full invoice value.
- ITC Not Available Where Invoice Is Not in Name of Insurer:
If the repair invoice is issued in the name of the insured, and not the insurance company, the conditions under Section 16(2)(a) and (aa) are not satisfied.
➤ In such cases, no ITC can be availed by the insurance company, even if reimbursement is made.
Source: Circular No.: 217/11/2024-GST
