Page 32 - GSTL_7th May 2020_Vol 36_Part 1

J14 GST LAW TIMES [ Vol. 36

INSURANCE PREMIUM RECOVERED
FROM EMPLOYEE IS NON-TAXABLE
UNDER GST
INSURANCE PREMIUM RECOVERED FROM EMPLOYEE IS NON-TAXABLE
By
Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.),
D.M.M., LL.B.
MANAGING PARTNER, TAXPAYERS ADVISORY SOLUTIONS

Insurance premium is being collected by the vari-
ous insurance companies to pay compensation on account
of accidental or medical benefits to a life insured person, who has taken insur-
ance policy from the insurance company. The tax liability of supply of insurance
services is under RCM. Services provided by an insurance agent to person carry-
ing on insurance business and person carrying on insurance business is liable to
pay GST under RCM.
It is corporate practice to take accident insurance policy or health insur-
ance policy known as Group Insurance policy for the employees’ as one of the
welfare measures to cover future eventualities of employees during their tenure
of employment with the organization. There are certain insurance policy like
mediclaim coverage for parents, spouse and their children where the employer
partially recover insurance premium amount from employee and subsequent
pay to insurance company. Whether the partially recovery of insurance premium
amount by the employer from the employee is liable to GST? This question is
answered by Authority for Advance Ruling under GST, Uttar Pradesh.
Advance Ruling
In Re : ION Trading India Private Limited, reported in 2020 (32) G.S.T.L.
608 (A.A.R. - GST - U.P.) vide Order No. 41, dated 25-9-2019.
Brief facts : The applicant is a private limited company, wholly owned sub-
sidiary of M/s. ION Trading UK Limited and engaged in the business of
software development which is exported to the overseas company. They pro-
vide group mediclaim coverage to all of its employees, their spouse and three
children, cost of which borne by the applicant. In addition to this, any em-
ployee has to pay an amount of Rs. 5,000/- for both the parents. The amount
of premium recovered from the employees by the applicant is restricted to
Rs. 5,000/- for both the parents and anything in excess of Rs. 5,000/- is bear
by the applicant. Accordingly, the applicant pays the recovered amount to
the insurance company against the increased insurance premium of next
year’s insurance policy. As regard to the mediclaim insurance of parents of
the employee, the following questions have been posted by the applicant :
(i) Whether amount recovered from the employees towards pa-
rental insurance premium payable to the insurance company
would be deemed as “Supply of Service” by the applicant to
its employees?
(ii) If the first question is answered in affirmative, whether the
value of aforesaid supply would be NIL, being provided in
the capacity of a “Pure Agent”? If valuation is not accepted as
NIL, what would be the value of such supply?
GST LAW TIMES  7th May 2020  32