GST Council Grants Major Relief To Insurance Sector, Declares Co-Insurance Premiums 'No-Supply' In ₹20,000 Crore Dispute Resolution

GST Council Grants Major Relief To Insurance Sector, Declares Co-Insurance Premiums 'No-Supply' In ₹20,000 Crore Dispute Resolution

The DGGI had sent notices for unpaid taxes to insurance companies with demands amounting to over ₹20,000 crores. The notified clarifications approved by the 53rd GST Council meeting has put a legal end to the long battle between the GST authorities and the insurance companies on ₹20,000 crore worth of notices

FPJ News ServiceUpdated: Saturday, July 06, 2024, 04:38 AM IST
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GST Council Grants Major Relief To Insurance Sector, Declares Co-Insurance Premiums 'No-Supply' In ₹20,000 Crore Dispute Resolution | Representative Image/ File

In a major relief to insurance companies in India, the Goods and Services Tax (GST) council has recommended significant relief measures and proposed the co-insurance premium apportioned by the lead insurer to the co-insurer be declared as "no-supply," and past cases be regularized on an "as is where is" basis extending a major relief to the insurance sector.

The DGGI had sent notices for unpaid taxes to insurance companies with demands amounting to over ₹20,000 crores. The notified clarifications approved by the 53rd GST Council meeting has put a legal end to the long battle between the GST authorities and the insurance companies on ₹20,000 crore worth of notices.

“The amendment will apply to existing cases and even those pending before courts. Dropping these enormous demands will lead to a more transparent structure for how insurance businesses are run in India and enhance the ease of doing business for insurance players,” said a spokesperson of a leading insurance player.

The insurance companies seeking urgent relief had taken up the GST demand notices on co-insurance and re-insurance commissions to North Block and IDRAI.

The insurance sector had been slapped with over 120 demand notices from Directorate General of GST intelligence (DGGI) since November 2022 for non-payment of Goods and Services Tax (GST) on account of co-insurance agreements, reinsurance commissions, and the reinsurance of crop schemes, etc.

GST authorities had been demanding GST on the portion of the premium shared with co-insurers, treating it as consideration for a service while GST was demanded on the reinsurance commission considering it as the insurer’s income.

The Bombay High Court had issued notices in a batch of 22 writ petitions filed by major insurance industry players challenging the GST levy on such co-insurance policies.

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