2021 (11) TMI 398 - AAR - GST

Supply of service or not - recovery of an amount towards Top-up and parental insurance premium from the employees - Section 7 of the Central Goods Service Tax Act, 2017 - HELD THAT - The term business broadly means any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefits. Any activity ancillary or incidental to these activities are also covered as business. It has also been provided that any activity or transaction falling in above categories would be business whether or not there is volume, frequency, continuity or regularity in transactions. As per the applicant, providing of Top Up Insurance/Parental Insurance is not mandatory under any law for the time being in force. Also, providing / not-providing of the Top Up Insurance/Parental Insurance is not going to affect the business of the Applicant in any way. Further, the applicant is not engaged in providing insurance service - The applicant is not taken input tax credit of the GST paid to the Insurance Company. Non-providing of Top Up Insurance/Parental Insurance coverage will not affect applicant's business by any way. Therefore, activity of recovery 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 activity undertaken by the applicant like providing of mediclaim policy for the employees and their parents (parents of the employees) through the insurance company neither satisfies conditions of section 7 to be held as supply of service (in the instant case, insurance service) nor is it covered under the term business of section 2(17) of CGST ACT 2017. Hence, we find that the applicant is not rendering any services of health insurance to their employees' parent and; hence, there is no supply of insurance services in the instant case of transaction between employer and employee. Thus, the recovery of the Top Up Insurance/Parental 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 the recovery of an amount towards Top-up and parental insurance premium from the employees amounts to a supply of any service under Section 7 of the Central Goods & Service Tax Act, 2017.

Issue-wise Detailed Analysis:

1. Recovery of Insurance Premium and Supply of Service:

The applicant, engaged in power generation, transmission, and distribution, provides additional insurance options to its employees under a 'Health & Wellness Policy'. Employees can opt for Top-up Insurance and Parental Insurance, with the premium recovered from their salaries. The applicant contends that this recovery does not constitute a supply of service under Section 7 of the CGST Act, as the applicant is not in the business of providing insurance services and the provision of such insurance is not mandatory under any law.

2. Definition and Scope of 'Supply':

Section 7 of the CGST Act defines 'supply' to include all forms of supply of goods or services for a consideration by a person in the course or furtherance of business. The applicant argues that their activity does not meet this definition as it is not in the course or furtherance of their primary business of power generation.

3. Related Persons and Business Definition:

The applicant highlights that employer and employee are deemed 'related persons' under the CGST Act. However, services provided by an employee to the employer are not considered supply. The applicant asserts that their activity does not fall under the definition of 'business' as provided in Section 2(17) of the CGST Act, which includes trade, commerce, and activities incidental or ancillary to these.

4. Jurisdictional Officer’s Contention:

The jurisdictional officer submits that the provision of insurance services to employees appears to be in the course of furtherance of business, thus meeting the conditions specified in Section 7 of the CGST Act, making the transactions treatable as 'Supplies'.

5. Authority’s Findings:

The Authority examined the facts, documents, and submissions. They noted that the applicant pays the insurance premium to the insurance company and recovers it from employees, without availing input tax credit on the GST charged by the insurance company. The Authority found that the applicant is not in the business of providing insurance services and that the recovery of premiums is not mandatory under any law, thus not affecting the applicant's business.

6. Precedents and Similar Rulings:

The Authority referred to previous rulings, including POSCO India Pune Processing Center Private Limited and Jotun India Private Limited, where similar facts led to the conclusion that recovery of insurance premiums from employees does not constitute a supply of service.

Conclusion:

The Authority concluded that the recovery of Top-up and Parental Insurance premiums from employees does not amount to a supply of service under Section 7 of the CGST Act. Consequently, the applicant is not liable to discharge GST on the recovered amounts.

Order:

The question of whether the recovery of an amount towards Top-up and parental insurance premium from the employees amounts to a supply of any service under Section 7 of the Central Goods & Service Tax Act, 2017, is answered in the negative.