Maharashtra AAR: No GST on Top-up Insurance Premiums Recovered From Employees

The Maharashtra Authority for Advance Rulings (AAR) has ruled that the top-up amount of medical insurance premium recovered from employees is not a supply and hence not liable to Goods and Services Tax (GST). The ruling was in regard to a clarification sought by Tata Power.

According to the AAR, Tata Power is not supplying any health insurance service to its employees or their parents in the course of its business or for the furtherance of business. The company only recovered a top-up amount towards the employees’ medical insurance or towards their parental insurance premiums. These amounts are then paid to the insurance company.

The AAR ruled that the amount recovered is not a supply and is hence not subject to GST. The company had not availed of the input tax credit on GST paid to the insurance company either.

There are many companies in India that allow employees to purchase health insurance over and above the cover that they provide to them. It could be a top-up insurance cover for themselves or for their parents or other family members.

Recently, there have been other similar rulings on the non-applicability of GST on charges recovered from employees. The Gujarat bench of the AAR had ruled that GST would not be leviable on the nominal amounts received from employees for using the canteen facilities. This is with regard to a clarification sought by Tata Motors on the money paid to third-party caterers and later recovered from its employees. 

Likewise, another ruling was held by the Uttar Pradesh Appellate Authority of Advance Ruling (AAAR) in the case of parking charges collected by M/s Ion Trading, a subsidiary of a UK-based company. In this case, while the company’s task of collecting parking charges and passing them on to the building’s authorities qualified as a service, the company’s role was that of a pure agent. Hence, no GST was applicable on the parking charges collected.

For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in