Insurance cos plan to file writ petition seeking GST clarity
Mar 13, 2024
Synopsis
Staring at a collective tax demand of ₹12,000 crore, the insurance sector was waiting for the GST Council meeting to get clarity over the issue. However, with no GST Council meeting in sight now before the formation of new government and the sector facing March 31 as a deadline to pay the tax, insurance companies are planning to file the writ petition against the tax demand before the end of this month.
Insurance players are planning to file a writ petition over the tax demand on commission paid for co-insurance, seeking a clarity from the court as levying Goods and Services Tax (GST) on the commission will amount to double taxation.
Staring at a collective tax demand of ₹12,000 crore, the insurance sector was waiting for the GST Council meeting to get clarity over the issue.
However, with no GST Council meeting in sight now before the formation of new government and the sector facing March 31 as a deadline to pay the tax, insurance companies are planning to file the writ petition against the tax demand before the end of this month, ET has learnt. The term 'co-insurance' means the insured has an option to spread their risk amongst more than one insurer by allocating risk shares to multiple insurers. The first insurer is called the lead insurer and the second is the co-insurer. It is a general industry practice done in cases where the risk involved is high.
Insurance cos plan to file writ petition seeking GST clarity
The insurers said as the GST on the entire value of insurance premium is already paid by the lead insurer, including on the share of premium belonging to the co-insurers, the tax demand would tantamount to "double taxation" and it is a settled law that the revenue cannot collect tax twice on the same service.
In September last year, ET had first reported that the Directorate General of Goods and Services Tax Intelligence (DGGI) had issued notices to ICICI Lombard and six other insurance companies raising tax demand, which were later sent across the industry to companies offering co-insurance. So far, over 20 insurance companies in the country are facing similar tax demands.
The notices, sent for the period July 2017 to March 31, 2022, had said that these companies have not paid GST on reinsurance premium, despite receiving commissions from co-insurance.
Sources from the industry said that the General Insurance Council, which is the apex association of all general insurance companies, has communicated with the finance ministry, which through an email dated February 19 said that the matter will be resolved soon.
"There is no likelihood of GST Council meeting before July and once the deadline is over, DGGI may proceed with attachment of accounts," a person aware of the deliberation told ET.
[The Economic Times]
