General insurance sector gets Rs 18,000 crore GST bonanza
By: Admin
June 27, 2024
Categories: GST Recent News
4 Min Read
Ahead of the Union Budget, the general insurance sector has received a bumper relief amounting to over Rs 18,000 crore with the GST Council dropping the tax demand that the insurers had been slapped with.
The reliefs allowed by the GST Council include the dropping of GST demands amounting to over Rs 18,000 crore at an industry level, providing a significant respite to the sector, according to the General Insurance Council (GI Council), the apex body of general insurance companies in India. The GST demand was on co-insurance and reinsurance commissions and taxing of reinsurance on crop schemes.
GI Council’s argument was that GST demands on co-insurance and reinsurance commissions lack a legal foundation and it also highlighted the implications of taxing reinsurance of crop insurance schemes as it may not benefit the farmers. “These efforts culminated in the GST Council granting the much-needed relief,” GI Council said.
The GST relief came after the General Insurance Council actively engaged in gathering industry feedback, organising sessions with insurance players and tax consultants, and coordinating meetings with the Revenue Secretary, Ministry of Finance, said an official. The reliefs were cleared in the GST Council meeting held on June 22.
In a coinsurance arrangement, multiple insurers (leader and follower) cover the risk of the insured. The leader collects the entire premium, discharges GST, and apportions the premium to co-insurers. The Tax department alleged that the follower’s share constitutes an “Outward Supply” under GST law, requiring GST payment despite the leader already discharging GST on the total premium.
According to the GI Council, the transaction between the Leader and Co-insurer was declared as “no supply” under Schedule III of the CGST Act. “No GST will be paid on such transactions. Past cases will be dropped,” it said.
On GST on reinsurance commission, the GI Council said this commission is a deduction from the reinsurance premium paid by the insurer to the reinsurer, which is considered a discount. The tax department alleged that the reinsurance commission is the insurer’s income, necessitating GST payment. The transaction of ceding commission/reinsurance commission between insurer and reinsurer declared as “no supply” under Schedule III of the CGST Act. No GST will be paid on such transactions and past cases will be dropped, it said.
GST liability on policies under government schemes for farmers/ crop risk was exempted from July 1, 2017. However, reinsurance premiums were not exempt until January 24, 2018. Due to the absence of a specific exemption, the Tax department proposed GST demands for the period from July 1, 2017, to January 23, 2018.
“An exemption notification exempting GST on reinsurance premiums is proposed for the interim period from July 1, 2017, to January 23, 2018. GST demands for this period will be dropped,” the council said.
The MD and CEO of Bajaj Allianz General Insurance, and Chairman of the General Insurance Council, said, “this decision by the GST Council is a testament to the relentless efforts and advocacy by the GI Council. It brings immense relief to the industry and ensures that the intended benefits of insurance reach the end-users without the burden of tax demands.”
The general insurance industry has urged the government to reduce the GST on individual health insurance policies from 18 per cent to 5 per cent in order to encourage people to avail these policies as a measure of social security. The general insurance industry collected Rs 109,000 crore premium under the health portfolio in fiscal 2023-24.
The general insurance industry mobilised Rs 2.89 lakh crore as premium under various segments in FY2023-24.
Source from: https://indianexpress.com/article/business/banking-and-finance/general-insurance-sector-gets-rs-18000-crore-gst-bonanza-9415115/
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