ICICI Lombard General Insurance Company Limited has received a tax demand of ₹273,44,50,284 from the Additional Commissioner of CGST & Central Excise, Palghar Commissionerate. The order relates to an industry-wide issue regarding the applicability of Goods and Services Tax (GST) on salvage and ineligible Input Tax Credit (ITC) on motor claims settled. The order has two main findings:
1. The company’s deduction of the value of scrap/salvage/wreck from motor vehicle claims payable is considered a supply under Section 7 of the CGST Act.
2. The company had mistakenly availed and utilized ITC on the strength of tax invoices issued by repairers/motor garages, in case of claims settled under the reimbursement mode.
The company had deposited an amount of ₹104,13,18,970 under protest, which was disclosed in its financial statements for the financial year ended March 31, 2024. The order seeks to appropriate this amount, which has been deposited by the company without accepting any liability. This development may impact the company’s financial performance and its relationship with its stakeholders. The issue is likely to set a precedent for the insurance industry, and other companies may need to re-evaluate their practices and compliance with GST regulations.