सामान्य बीमा क्षेत्र को 18,000 करोड़ रुपये का जीएसटी बोनस मिला।

सामान्य बीमा क्षेत्र को 18,000 करोड़ रुपये का जीएसटी बोनस मिला।

General insurance sector gets Rs 18,000 crore GST bonanza.

The general insurance sector in India has received a significant relief from the GST Council, which dropped tax demands totaling over Rs 18,000 crore.

  • Business
  • 147
  • 26, Jun, 2024
Jyoti Ahlawat
Jyoti Ahlawat
  • @JyotiAhlawat

General insurance sector gets Rs 18,000 crore GST bonanza.

Ahead of the Union Budget, the general insurance sector has received substantial relief with the GST Council dropping tax demands totaling over Rs 18,000 crore.

The General Insurance Council (GI Council), the apex body for general insurance companies in India, reported that the GST Council's decision to waive these demands provides significant respite to the industry. The GST demands in question pertained to co-insurance and reinsurance commissions, as well as the taxation of reinsurance on crop schemes.

The GI Council argued that the GST demands on co-insurance and reinsurance commissions lacked legal foundation and highlighted the adverse effects of taxing reinsurance for crop insurance schemes, which could potentially harm farmers. These efforts led to the GST Council granting the much-needed relief, according to the GI Council. The relief measures were approved at the GST Council meeting held on June 22.

In a co-insurance arrangement, multiple insurers share the risk of the insured. The leader insurer collects the entire premium, pays the GST, and distributes the premium among co-insurers. The tax department had contended that the follower's share should be treated as an "Outward Supply" under GST law, requiring additional GST payment. However, the GI Council maintained that transactions between the leader and co-insurer should be classified as "no supply" under Schedule III of the CGST Act, thereby exempting them from GST. Consequently, past cases will be dropped.

Regarding GST on reinsurance commissions, the GI Council explained that these commissions are essentially discounts on reinsurance premiums. The tax department had considered reinsurance commissions as the insurer's income, necessitating GST payment. The GI Council argued that ceding commission/reinsurance commission transactions between insurers and reinsurers should also be classified as "no supply" under Schedule III of the CGST Act, exempting them from GST. Past cases will be dropped as a result.

Additionally, the GST liability on policies under government schemes for farmers and crop risk was exempt from July 1, 2017. However, reinsurance premiums were not exempt until January 24, 2018, leading to proposed GST demands for the interim period. An exemption notification is proposed for this period, which will result in the dropping of GST demands.

Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, and Chairman of the General Insurance Council, praised the GST Council's decision as a testament to the GI Council's persistent efforts. He emphasized that this decision brings immense relief to the industry and ensures the intended benefits of insurance reach end-users without the burden of tax demands.

The general insurance industry has also urged the government to reduce GST on individual health insurance policies from 18% to 5% to encourage more people to avail of these policies for social security. The industry collected Rs 109,000 crore in premiums under the health portfolio for the fiscal year 2023-24.

News Reference

Jyoti Ahlawat

Jyoti Ahlawat

  • @JyotiAhlawat