Clarification on GST for Salvage/Wreck Value in Motor Vehicle Claims

Insurance companies generally insure motor vehicle repairs and damages. For claims, the salvage or wreck value is considered during settlement. If the salvage value is deducted from the claim and does not transfer to the insurer, GST is not applicable on that salvage value as it is not deemed a taxable supply.

However, if the insurer pays the full claim amount and then takes ownership of the salvage, GST is applicable on the disposal of the salvage. This is because, in such cases, the salvage becomes the property of the insurance company, which must handle the GST on its sale.

In summary, no GST applies if the salvage value is deducted from the claim and remains with the insured. GST is required if the insurer owns the salvage