In a recent ruling, the Madras High Court ( HC ) ruled that co-insurance premiums and reinsurance commissions are not taxable under the Goods and Services Tax ( GST ) following the inclusion of Items 9 and 10 in Schedule III of the Central Goods and Services Tax ( CGST ) Act, 2017.
The writ petitions were heard together as they involved identical issues and sought similar reliefs. Several insurance companies including Royal Sundaram, Cholamandalam MS, United India Insurance, and Star Health challenged the impugned orders dated December 30, 2023, February 13, 2024, and August 9, 2024.
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The main issue was whether co-insurance premiums and reinsurance commissions were to be treated as “supply” and subject to GST. The petitioners’ counsel claimed that these transactions should not be treated as supply so it should not attract GST liability.
The petitioners’ counsel relied on the amendment made in Schedule III of the CGST Act, 2017, effective from November 1, 2024, which excluded co-insurance premiums and reinsurance commissions from the bracket of supply under Items 9 and 10.
The petitioners’ counsel relied on a circular dated October 11, 2024, which clarified that prior payments or exemptions would be regularized under the “as is where is” principle without refund or further tax collection. The petitioners contended that amounts deposited under court direction, totaling Rs. 10 crores, Rs. 12 crores, and Rs. 13.5 crores were not voluntary tax payments.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The petitioners’ counsel sought directions for the refund of these amounts explaining that they were challenging the entirety of the assessment orders.
On the other hand, the respondents’ counsel argued that before the inclusion of Item Nos. 9 and 10 in Schedule III of the CGST Act, co-insurance premiums and reinsurance commissions were considered taxable as “supply.”
They argued that amounts already received by the department before the amendments should not be refunded and claimed that the deposits made by the petitioners under court direction were essentially payments toward tax liabilities and should be utilized as such.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The petitioners’ counsel countered that the amounts deposited were not voluntary tax payments but made under the court’s direction qualifying them as deposits.
A single bench led by Justice Krishnan Ramasamy heard both sides and observed that the amounts deposited were not voluntary payments but made under its directions so they could not be treated as tax payments. The court explained that the deposits could only be utilized for tax payments following the final adjudication of the petitions.
The court that as per the amended Schedule III and the circular dated October 11, 2024, co-insurance premiums and reinsurance commissions were excluded from the definition of supply. So, the court set aside the impugned orders and directed the respondents to refund the amounts of Rs. 10 crore, Rs. 12 crore, and Rs. 13.5 crore deposited by the petitioners within four weeks. The writ petition was allowed with no costs awarded.
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