The Tamil Nadu Authority for Advance Ruling ( AAR ) has clarified that health insurance services provided by United India Insurance Company Limited to the Tamil Nadu State Government ( TNSG ) are exempt from Goods and Services Tax ( GST ) under S.No.40 of Notification No.12/2017 Central Tax (Rate).
The decision also clarified that reinsurance services received from foreign reinsurers are exempt from GST, though domestic reinsurance remains outside the scope of this judgment.
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The ruling addressed the issues raised by the applicant, M/s. United India Insurance Company Limited regarding the GST applicability on insurance and reinsurance services.
The applicant company had sought clarity on whether their health insurance services for TNSG qualify for GST exemption and the status of reinsurance services, particularly those provided by foreign reinsurers.
The applicant argued that since the health insurance premiums for TNSG are fully covered by the state government, the services should be exempt from GST under Serial Number 40 of Notification No. 12/2017-Central Tax (Rate).
It was also contended that reinsurance services provided in conjunction with these policies should also be exempt, as specified under Serial Number 36A of the same notification.
The two-member authority comprising Smt. D. Jayapriya, I.R.S. (CGST Member) and Smt. A. Valli (SGST Member) affirmed that the health insurance services rendered to the TNSG are indeed exempt from GST. This exemption is in line with Circular No. 16/16/2017-GST and minutes from the 23rd GST Council meeting, which support the notion that government-funded insurance schemes are not subject to GST.
Regarding reinsurance, the AAR ruled that services provided by foreign reinsurers are exempt from GST. The tax liability under the Reverse Charge Mechanism (RCM) is not applicable in this case for foreign reinsurers as the services are deemed exempt.
The ruling confirms that reinsurance services received from foreign reinsurers are exempt from GST, thereby negating the need for the applicant to discharge GST under RCM for these services.
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However, the judgment did not extend to domestic reinsurance, as this issue was considered outside the scope of the current ruling. The ruling also did not address the valuation questions or the applicability of Input Tax Credit (ITC) since these matters were deemed contingent on the primary issue of GST exemption.
The AAR ruling has provided clarity for insurers and other entities involved in providing services to state governments, clarifying the tax treatment for government-funded insurance schemes and international reinsurance transactions.
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