No GST exemption on medical insurance premiums to employees and pensioners: AAAR
The supply received by the applicant did not fall under the Central Tax Notification
The Telangana bench of the Appellate Authority for Advance Ruling (AAAR), has upheld the order of the Authority for Advance Ruling (AAR). It ruled that no Goods and Services Tax (GST) exemption was available on medical insurance premiums to employees, pensioners, and their family members.
The applicant Hyderabad Metropolitan Water Supply and Sewerage Board paid medical insurance premiums (taken to provide health Insurance) to the employees, pensioners and their family members and a Vehicle Insurance Policy to provide Insurance for the vehicles owned by the Board.
The applicant claimed it was exempt from paying GST under the Central Tax Notifications. Therein, it was provided that services (excluding works contract service or other composite supplies involving the supply of any goods) provided to the Central government, the state government, union territory, local authority, or governmental authority, related to any function entrusted to a panchayat or municipality under the Constitution of India, the GST rate would be ‘Nil.’
The AAAR members Neetu Prasad and B V Siva Naga Kumari observed that the phrase ‘in relation to’ mentioned in the notification meant a direct and proximate relationship to any function entrusted to a municipality under the Constitution, which herein, was the water supply and sewerage board.
The bench, thus, held, “The insurance services for employees and family members received by the applicant is not in direct and proximate relation to water supply and sewerage related function entrusted under the Constitution. Hence the supply received by the applicant does not fall under the Central Tax (rate) Notification, and is not exempted.”
The order further stated, “In view of the amendment, omitting the word ‘government authority’, the services provided to the applicant are not eligible for exemption.”