2024 (12) TMI 434 - HC - GST

Whether the Co-insurance premium and Reinsurance commission would be treated as supply or would be liable to pay the GST? - Refund - HELD THAT - The amounts deposited by the petitioner is not the amount paid towards the discharge of tax liability, and only upon the direction of this Court, the amounts stated supra have been deposited. Therefore, the amount so deposited cannot be considered as the amount paid for the purpose of discharge of tax liabilities. The amount so deposited can be utilized for the payment of tax only upon the final adjudication of the present Writ Petitions. There is no doubt that the amount, which was deposited subsequent to the order of this Court, would be the amount for discharging the output tax liabilities, however, the utilisation of the said amount has been deferred till the disposal of these petitions. As per the inclusion of Item Nos.9 and 10 to the Schedule III of CGST Act, 2017 read with Circular dated 11.10.2024, the amount, which was paid or utilized for the discharge of tax liabilities, would not be refunded by the Department. However, in this case, the utilisation of amount, which was deposited subsequent to the order passed by this Court, has been deferred till the disposal of these petitions and hence, as on date, the said amount is only a deposit. Therefore, as per the aforesaid inclusion of Item Nos.9 and 10 to the Schedule III of CGST Act, 2017, this Court is of the considered view that the co-insurance premium and re-insurance commission would not be considered as supply and thus, the petitioners are certainly entitled for refund. The impugned orders are liable to be set-aside - Petition allowed.

Summary

Issues:
Whether co-insurance premium and reinsurance commission are considered supply for GST liability.

Analysis:
The judgment involved multiple writ petitions challenging orders related to the treatment of co-insurance premium and reinsurance commission for GST liability. The petitioners argued that these amounts should not be considered as supply and hence not liable for GST. The Senior Counsel for the petitioners referred to recent amendments in Schedule III of the CGST Act, 2017, which excluded these items from the purview of supply. The department issued a circular clarifying the treatment of payments made before the inclusion of these amendments. The petitioners had deposited certain amounts as per court directions, which they argued were not towards tax liability but under protest. The court noted that these deposits were not for tax discharge and should be refunded. The court held that the co-insurance premium and reinsurance commission are not considered supply, entitling the petitioners to a refund.

The court considered the arguments of both parties regarding the nature of the amounts deposited by the petitioners. It was established that the deposits were not for tax liability discharge but made under court directions. The court emphasized that these amounts could only be utilized for tax payment after final adjudication. Referring to the amendments in Schedule III of the CGST Act and the circular, the court concluded that the petitioners were entitled to a refund of the deposited amounts. Therefore, the impugned orders were set aside, and the respondent department was directed to refund the deposited amounts to the petitioners within a specified period.

In conclusion, the court allowed the writ petitions, directing the refund of the deposited amounts to the petitioners. The judgment clarified that the co-insurance premium and reinsurance commission are not considered supply for GST liability. The court emphasized that the amounts deposited by the petitioners were not for tax discharge and should be refunded. The decision was based on the recent amendments in the CGST Act and the circular issued by the department regarding the treatment of payments made before the amendments.