No GST on recovery of amount of separate top-up insurance and parental insurance by employer from employees: AAR

Case Details: Authority for Advance Rulings, Maharashtra Tata Power Company Ltd., In re - [2022] 134 taxmann.com 69 (AAR - MAHARASHTRA)

Judiciary and Counsel Details

• • Rajiv Magoo and T.R. Ramnani, Member

Facts of the Case

The applicant had an arrangement with an insurance company for providing group insurance (mediclaim) cover to its employees for which a master insurance policy was issued by insurance company to applicant. It also formulated a ‘Health and Wellness Policy’, wherein employees were given an option to opt for an additional insurance for themselves as well as their parents for which applicant had taken a separate top-up insurance and parental insurance from insurance company. It filed an application for advance ruling to determine taxability of amount recovered by it from employees towards top-up and parental insurance premium.

AAR Held

The Authority for Advance Ruling observed that the amount of premium recovered from the employees for Top-up insurance and Parental insurance was shown as a deduction on the pay-slips of the employees. The activity of recovery of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. Moreover, the applicant was not rendering any services of health insurance to their employees’ parent and; hence, there was no supply of insurance services in the instant case of transaction between employer and employee. Thus, it was held that such recovery would not amount to consideration for supply of any service and not taxable under GST.

Case Review

• • Posco India Pune Processing Center (P.) Ltd., In re [2019] 102 taxmann.com 21 (AAR – Mah.) (para 5.14)
  • Jotun India (P.) Ltd., In re [2019] 110 taxmann.com 184/76 GST 691 (AAR – Mah.) (para 5.15) followed.

List of Cases Referred to

• • Posco India Pune Processing Center (P.) Ltd., In re [2019] 102 taxmann.com 21 (AAR – Mah.) (para 5.14)
  • Jotun India (P.) Ltd., In re [2019] 110 taxmann.com 184/76 GST 691 (AAR – Mah.) (para 5.15) followed.