GST Exemption On 'Reinsurance Services' In Relation To Govt Insurance Schemes Applies With Retrospective Effect From July 01, 2017: Delhi HC
The Delhi High Court has held that GST exemption on foreign reinsurance services in relation to government insurance schemes applies with retrospective effect, from July 1, 2017 onwards.
This was in light of the fact that though the exemption was notified only on July 27, 2018, the government regularized GST liability on such services for the period from July 01, 2017 till July 26, 2018.
Entry 40 in Notification No.12/2017 exempts GST liability on reinsurance services provided to the Government under insurance schemes for which total premium is paid by the Government.
A division bench of Justices Yashwant Varma and Ravinder Dudeja said though Entry 40 was included in the above notification dated 28 June 2017, only with effect from July 27, 2018,
“The GST Council as well as the Union Government…appear to have taken a conscious decision to regularize the period between 01 July 2017 and 26 July 2018.”
Significant to note that Entries 35 and 36 of the said notification exempt certain specified general insurance and life insurance schemes from GST.
Entry 36A further exempted 'reinsurance' of the insurance schemes specified in Entries 35 or 36. However, this Entry was silent on 'reinsurance' services in relation to government insurance schemes under Entry 40.
Thus, an 'amending notification' was issued on 26 July, 2018 which added Entry 40 to exemption under Entry 36A with effect from the next day.
Later, vide Circular dated July 15, 2024, the Finance Ministry decided to regularize payment of GST on 'reinsurance services' relating to government insurance schemes (Entry 40 of Notification No. 12/2017) for the remaining period.
The question before the Court was whether the demand order issued to the Petitioner, a foreign insurance company having reinsurance agreements in relation to health insurance coverage provided under State government schemes, for the period 01 July 2017 to 25 July 2018 is sustainable.
The demand dated 20 December, 2023 was in respect of non-payment of IGST on reinsurance services for the said period.
High Court said,
“While it is true that on 20 December 2023, when the impugned order came to be passed, these clarifications had not been rendered, undisputedly, the same would not sustain in light of the stand (regularization of GST liability) which has been taken by the respondents and is principally noticed hereinabove.”
In view of the aforesaid, the High Court allowed the writ petition and quashed the impugned demand order.
Appearance: Senior Advocate Tarun Gulati, with Advocates Sandeep Chilana, Priyojee Chatterjee and Pramod for Petitioner; Central Government Standing Counsel Ravi Prakash with Advocates Isha, Ashu and Taha Yasin for UOI; Senior Standing Counsel R Ramchandran; Senior Standing Counsel Anurag Ojha and Advocate Subham Kumar for R-5; Advocate Abhishek Gola for R6 & R7
Case title: AXA France Vie-India v. Union of India & Ors.
Case no: W.P.(C) 4136/2024