This e-Tax Guide explains the GST treatment for Cash Payments and input
tax incurred on motor car expenses by GST-registered general insurance
companies.
Under an insurance contract, an insurance company may choose or be
required to make cash payment to the claimant when an insured event
happens (referred to as “Cash Payment” in this e-Tax Guide).
There are generally two circumstances where Cash Payment is made under
the insurance policy. One, where the insured incurs a loss and makes a cash
claim from the insurance company (also known as cash indemnity payment)
and two, where an insured event happens and the insured is entitled to
receive an agreed sum from the insurance company. The GST-registered
insurance company can claim deemed input tax on Cash Payments made
under insurance policies that are subject to GST and issued to prescribed
policyholders
For a motor car insurance contract, an insurance company may choose to
repair, reinstate or replace an insured motor car instead of making a Cash
Payment. In order to repair, reinstate or replace the motor car, the insurance
company would have to contract with third party suppliers to perform the
services or supply the goods and thus, incur input tax if the supplier is GST
registered. The GST-registered insurance company can claim input tax
incurred in respect of motor cars that are insured under the insurance
policies
Source: gov.sg
