Whether an insurance claim will be received for the portion of ITC reversal that had

been availed at the time of purchase of the said stock/capital assets? In case of flood
claims, fire claims or theft claims w.r.t. damaged/ stolen stocks/capital assets,
assessment of loss of stock/capital assets is done excluding GST because in most cases at
the time of purchase, the ITC has been availed and the same is accounted for in the
books and reflected in GST returns. Hence, the insured entity gets the claim for loss
excluding GST.
Insured does not reverse the GST as the claim is exclusive of GST. However, the GST
Department issues notice to the insured entity to reverse the ITC on stocks that are
damaged/lost, and then the insured entity is bound to pay tax. At that point in time, it claims
GST so paid from the insurance company in addition to the loss assessed. The insurance
company then asks for GST returns with reversal of GST in books and returns and also a
certificate from Chartered Accountant to sanction GST claim. Generally, the insurance
company will indemnify the insured with the value of a stock before the loss. Suppose the
taxable value of the stock is ` 100/- and GST charged is ` 18/- the insured would have taken
ITC of ` 18/-.
However, as per section 17(5)(h) (goods lost, stolen, destroyed, written off, or disposed
of by way of gift or free samples), the insured is required to reverse the ITC of ` 18/-.
Since ITC is not eligible as per the above provision, the same becomes the cost of the
stock lost. Hence, the total loss of stock is ` 118/- and the insurance company has to
compensate ` 118/-.
However, the insurance company may want to ensure whether the ITC involved in the
loss of stock has been reversed to validate the exact value of the loss of stock.

Read more at: https://taxguru.in/goods-and-service-tax/gst-implications-insurance-claim-received-loss-

stock-capital-assets.html
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