No GST Levy on Recovery Amount of Employee’s Insurance Premium Top-up

Maharashtra bench of GST authority for the advance rulings (AAR) ruled that the recovery of the amount for the top-up of medical insurance and the parental insurance premium via employees does not come beneath the supply and thus it is not entitled to GST.

The AAR ruled that Tata Power seeking the ruling is not providing any kind of services of the health insurance to its employees or their parents and there shall be no supply of insurance services. Thus the problem of waiving the GST does not come. But it must be notified that the firm does not claim the ITC towards the GST which gets imposed via the insurance company. Towards the concern, the AAR bench depends on the same ruling provided in 2018 towards the Posco India Pune processing center.

Read Also: Is it Possible to Claim GST Paid on Insurance Premium?

TOI mentioned that the Gujarat bench specified their concern in the Tata Motors where they provide that the GST shall not be levied on the basic amount that has been collected from the employees for the canteen facilities that the company has given the green flag towards the 3rd caterer. But it indeed said that the ITC shall be restricted.

“Under the tax expert, The correct view is that there should be no recovery on nominal sums received from employees as there is no taxable supply. If this line of argument does not hold good, it can be argued that the company is acting as a pure agent and the value of ‘services’ should be taken as nil.”

But it added that the firm is eligible as a pure agent. Hence no GST shall be imposed on the sum obtained via employees. Read judgement here

Some days ago, LIC chairman M.R. Kumar has expressed their views about the impact of GST on the insurance sector or industry. He told that the 18% GST rate is too high on premiums.