Medical Insurance Premium to Employees, Pensioner and Family Members Attracts GST: AAAR [Read Order]

The Appellate Authority for Advance Rulings (AAAR), Telangana bench, while upholding an AAR order, has held that no GST exemption is available on medical insurance premiums taken to provide health insurance to employees, pensioners, and their family members.

The applicant M/s. Hyderabad Metropolitan Water Supply and Sewerage Board have paid Medical insurance premium taken to provide health Insurance to the employees, pensioners and their family members and Vehicle insurance Policy taken to provide Insurance to the vehicles owned by the Board.

The applicant claimed that they are exempt from paying GST in view of the Entry No. 3 of the Notification Number 12/2017 – Central Tax (Rate), dt 28th June, 2017, wherein it is provided that Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution, the rate of GST is NIL.

The Members Ms. Neetu Prasad and Ms. B V Siva Naga Kumariobserved that the Phrase ‘in relation to’ mentioned in Sl. No 3 of Central tax (rate) notification no 12/2017 is to be read as meaning a direct and proximate relationship to any function entrusted to a Municipality under article 243W of the Constitution in present case Water supply and sewerage.

Concluding the order, the AAAR bench held that “the insurance services for employees and employees family members received by the applicant is not in direct and proximate relation to water supply and sewerage related function entrusted under Article 243W , hence the supply received by the applicant does not fall under Sl.No 3 of Central tax (rate) notification no 12/2017 and are not exempted.”

“In view of the above from 18-11-2021, in view of the amendment mentioned above omitting the word ‘Government authority’, the services provided to the applicant are not eligible for exemption under Sl.No 3 of Notification no 12/2017 dated 28-06-2017,’ the order said.

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