CBIC Circular No. 217/11/2024-GST: ITC Entitlement for Insurance Companies on Motor Vehicle Repairs

CBIC has issued Circular No. 217/11/2024-GST dated June 26, 2024, clarifying the entitlement of Input Tax Credit (ITC) for insurance companies on expenses incurred for motor vehicle repairs under reimbursement mode of insurance claim settlement.

Insurance companies often settle motor vehicle repair claims either through Cashless or Reimbursement modes. In Reimbursement mode, where insured individuals pay non-network garages directly, some field formations had raised concerns regarding ITC eligibility for insurance companies on repair invoices issued by these garages.

The Circular clarifies that under Section 17(5) of the CGST Act, ITC is available to insurance companies for motor vehicle repair services received, even under reimbursement mode, as the insurance company ultimately bears the liability for these services. This is in line with the definition of “recipient” under Section 2(93) of the CGST Act, where the insurance company is considered liable for the repair service provided, despite the initial payment by the insured.

Additionally, the Circular addresses scenarios where repair invoices may include amounts exceeding approved claim costs. It specifies that ITC is available to the insurance company only on the portion reimbursed to the insured, not on any excess amounts.

Furthermore, it clarifies that ITC will not be available if the repair invoice is not issued in the name of the insurance company, as per conditions under Section 16(2) of the CGST Act.

The Circular aims to ensure uniform implementation of GST provisions across field formations and encourages dissemination through suitable trade notices.