2019 (10) TMI 482 - AAR - GST

Classification of supply - supply of services or not - recovery of 50% of Parental Health Insurance Premium from employees - Section 7 of the Central Goods and Service Tax Act, 2017? - HELD THAT - The documents of insurance scheme submitted on record that the applicant provides Mediclaim cover to their employees parents. There are four types of category of scheme wherein sum insured amount for family floater is at ₹ 300000/-and premium amount is fixed as per the number of parents involved therein. The applicant will bear 50% amount for maximum 2 members only and rest of money will be paid by respective employee. It is cashless Mediclaim insurance policy for the lock-in period of 3 years. The mediclaim insurance policy is made from The Oriental Insurance Company Ltd . The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of 50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. The recovery of 50% of Parental Health Insurance Premium from employees does not amounts to supply of service under Section 7 of the Central Goods and Service Tax Act, 2017.

Summary

Issues Involved:
1. Whether recovery of 50% of Parental Health Insurance Premium from employees amounts to "supply of service" under Section 7 of the Central Goods and Services Tax Act, 2017.

Issue-Wise Detailed Analysis:

1. Recovery of 50% of Parental Health Insurance Premium from Employees:
- Applicant's Contention:
- The applicant, a manufacturer and supplier of paints, offers an optional parental insurance scheme to employees, paying the full premium initially and recovering 50% from employees' salaries.
- The applicant argues that this recovery does not constitute a "supply of service" under Section 7 of the CGST Act, 2017, as it is merely a cost recovery and not a service provision.
- The term "supply" under Section 7 includes all forms of supply of goods or services made for consideration in the course or furtherance of business. The applicant contends that the recovery is neither in the course of business nor for its furtherance, as providing insurance is not part of its business activities.
- The applicant references Schedule-III of the CGST Act, which excludes services by an employee to an employer in the course of employment from being considered as supply.

2. Concerned Officer's Contention:
- The officer concurs with the applicant, noting that the recovery of the insurance premium is in relation to employment and not in the course or furtherance of business.
- The officer references an earlier ruling (Advance Ruling No. GST-ARA-36/2018-19/B-110) which held that such recoveries do not constitute a supply of service.

3. Authority's Observations:
- The authority reviewed the facts, noting that the applicant is not in the business of providing insurance but manufactures paints and coatings.
- The insurance service is provided by an insurance company, with the applicant merely recovering part of the premium from employees.
- The authority examined the definitions of "supply" under Section 7 and "business" under Section 2(17) of the CGST Act and concluded that the recovery of insurance premiums does not meet the criteria for a supply of service.
- The authority referenced the similar case of M/s. POSCO India Pune Processing Center Private Limited, which ruled that recovering insurance premiums from employees does not constitute a supply of service.

Conclusion:
- The authority ruled that the recovery of 50% of the Parental Health Insurance Premium from employees does not amount to a "supply of service" under Section 7 of the CGST Act, 2017.

Order:
- The question of whether the recovery of 50% of the Parental Health Insurance Premium from employees amounts to a "supply of service" under Section 7 of the CGST Act, 2017, is answered in the negative.