Depreciation on Painting Charges in Motor Own Damage Claims

The following notification was in force until  October 2012, when the IRDA came out with an “Exposure Draft” inviting all stake holders “to provide their comments on the draft proposal of modifications to “GR-9:Depreciation on Parts of Partial Loss Claims” on the erstwhile India Motor Tariff”.

Subsequently the IRDA issued a fresh notification (IRDA/NL/ORD/MISC/006/01/2013, dated 08thJanuary 2013) partially modifying the GR-9” which shall be applicable to all Motor Package Policies whose risk inception date fall on or after 01 February 2013.

Until March 31, 2012, General Insurance Companies in India did not apply any depreciation on painting charges under Motor Own Damage Claims. The entire painting charges (including cost of paint) was treated a labour charge while assessing claims. This is going to change for any claims reported on or after April 1, 2012.

At a meeting held on 29/02/2012, the General Insurance Council has decided that from April 1, 2012, the cost of paint will also be subject to depreciation just like other vehicle parts.

Though some of the dealers do bifurcate the cost of paint and the relevant labour charges, most of the dealers generally include the cost of paint as part of labour chages. 

In order to decide the cost of paint, it is now decided that the bifurcation of material & labour charges from the total value of the painting charges shall be s per VAT rule of the respective State Governments. Where the guidelines are not laid down, the insurance companies will follow the Court Order of Kerala Consumer Court which had advised bifurcation of the total cost into 70% as material cost and 30% as labour charges.

The VAT rules of the various State Governments are as given below:

States/UT	Section/Rule Ref	Service Ref	Standard Deduction of Labour as notified by state	Remarks
Andhra Pradesh	Rule 17	Painting	20%
Arunachal Pradesh	Section 5 & Rule 5	Painting	30%
Assam	Section 11 & Rule 10	Painting	20%
Bihar	Section 35 & Rule 18		NA	To follow 30% for Labour and 70% for the material as per Court Order
Chattisgarh	Rule 15		NA	To follow 30% for Labour and 70% for the material as per Court Order
Chandigargh	Rule 15		NA	To follow 30% for Labour and 70% for the material as per Court Order
Dadra & Nagar Haveli	Section 5 & Rule 3	Painting	30%
Daman & Diu	Section 5 & Rule 3	Painting	30%
Delhi	Section 5 & Rule 3	Painting	30%
Goa	Section 2(a1), 2(1d) & Rule 4A	Painting	50%
Gujarat	Section 2(30) & Rule 18AA	Painting	20%
Haryana	Section 2(zg) & Rule 5	Painting	30%
Himachal Pradesh`	Section 2(zd) & Rule 17	Painting	25%
Jharkhand	Section 9 & Rule 22	Painting	20%
Jammu & Kashmir	Section 2 (XXXVIII)		NA	To follow 30% for Labour and 70% for the material as per Court Order
Karnataka	Rule 3	Painting	20%
Kerala	Rule 10	Painting	25%
Maharashtra	Rule 58	Painting	20%
Meghalaya	Section 5 & Rule 12	Painting	20%
Mizorom	Section 8 (2)(c)	Painting	30%
Madhya Pradesh		Painting	NA	To follow 30% for Labour and 70% for the material as per Court Order
Manipur	Section 9 (2)(c)	Painting	20%
Nagaland	Section 2(XXXI)		NA	To follow 30% for Labour and 70% for the material as per Court Order
Orissa	Section 11		NA	To follow 30% for Labour and 70% for the material as per Court Order
Pondicherry	Section 15		NA	To follow 30% for Labour and 70% for the material as per Court Order
Punjab	Section 8 & Rule 15(4) (6)	Painting	25%
Rajasthan	Rule 22	Painting	25%
Sikkim			NA	To follow 30% for Labour and 70% for the material as per Court Order
Tamil Nadu	Section 5 & Rule 8(5)	Painting	30%
Tripura	Section 5 & Rule 3		NA	To follow 30% for Labour and 70% for the material as per Court Order
Uttar Pradesh	Rule 9	Painting	40%
Uttaranchl	Rule 14		NA	To follow 30% for Labour and 70% for the material as per Court Order
West Bengal	Section 18 & Rule 30	Painting	30%

Note:

1. Depreciation to be applied on the painting material shall be as per the age of the vehicle, similar to other parts.
2. Garages should bifurcate material and labour charges, out of the total painting charges as per the requirements laid down under government tax rules.

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