Page 25 - GSTL_6th August 2020_Vol 39_Part 1

2020 ] ITC ON MEDICAL INSURANCE — AN AREA OF DARKNESS J7
 Medical insurance does not provide any additional coverage while
health insurance offers flexibility in terms of coverage.
 In case of medical insurance, the pre-assured sum is limited while in
health insurance the sum assured limit can be substantial.
It is clear from the above that though there is a difference between medical and
health insurance policy but the thin line between the said policies must be under-
stood in the light of the intent and purpose of the persons to be insured for. Thus, it
can be said that health insurance is a comprehensive policy and medical insurance
may consider to be a part of it. However, due caution and care must be taken while
selecting the policy in order to comply with the guidelines mandated by the MHA
order.
Coming to the moot question, is ITC on medical insurance allowable un-
der GST? The second proviso to Section 17(5)(b) of CGST Act, 2017 read as
under :
“Provided that the input tax credit in respect of such goods or services or
both shall be available, where it is obligatory for an employer to provide the
same to its employees under any law for the time being in force.”
It is relevant to note that MHA has issued the above orders under Disaster Man-
agement Act and these orders are mandatory for all the employers/registered per-
sons/manufacturers in the country. Further, it is pertinent to highlight that IRDA
has already issued necessary instructions to all health insurance companies direct-
ing that all general and health insurance companies may offer comprehensive
health insurance policies in order to enable the businesses across the country to
comply with the directions. Therefore, on the basis of the aforesaid development, it
can be said that ITC on such medical insurance should not be disputed and denied
by the department. However, it is important to abide by the relevant provision i.e.
Section 16 of the CGST Act while claiming any ITC under the GST regime. There is
a possibility of facing a dispute with the department regarding claims of ITC on
medical insurance for the workers in the light of the express restriction prescribed
on health services in the Act.
It is apparent from the above discussion that since it is obligatory for an
employer to provide the said insurance to its employees, ITC on such medical
insurance services can be availed presently on the basis of the MHA’s order in
force. However, it is utmost important for the businesses to evaluate their insur-
ance policy in order to decide on the eligibility of ITC on the same. Moreover, the
aforesaid guidelines issued by the MHA resulted into many open issues in avail-
ing the ITC on the medical insurance mandated under the said order. For the
sake of present discussion, the said issues are discussed below :
 There is no clarity in the said guidelines in respect of obligatory pe-
riod, if any, for procuring medical insurance for the workers.
 There is no clarity on whether the mandatory cover is to be compul-
sorily obtained before starting the operations or the same can also
be obtained within a specified timeline.
 It is also not clear whether the existing mediclaim policy taken for
the health insurance cover for the worker, would qualify the re-
quirement prescribed under the said guidelines and eligible to claim
ITC on the same.
GST LAW TIMES  6th August 2020  25