Determination of value of supply in relation to Life Insurance business [Rule 32(4) of CGST Rules] - GST Ready Reckoner - GST

Special provision related to determination of value of service in relation to life insurance business - Rule 32(4) of the GST Rules Taxable value varies with nature of insurance policy. The details are as follows:- Where policy has dual benefits of risk coverage and investment Taxable value is gross premium charged less amount allocated for investments or savings if such allocation is intimated to the policy holder at the time of collection of premium. Single premium annuity policy where allocation for investments and savings is not intimated to the policy holder taxable value is 10% of the single premium charged from the policy holder. Other cases- (a) 25% of premium charged from the policy holder in the first year, and (b) 12.5% of premium charged for subsequent years. where insurance policy has benefit of risk coverage only - then taxable value is entire premium charged from the policy holder. Note 1. Whether the amount of insurance premium, which is not included in the taxable value as per Rule 32(4) of CGST Rules applicable for life insurance business, shall be treated as pertaining to a non-taxable supply/ exempt supply for the purpose of reversal of Input tax credit as per Section 17(1) of CGST Act read with Rule 42 43 of CGST Rules . [ Circular No. - 214/8/2024-GST dated 26.06.2024 ] Clarification - it is clarified that the amount of the premium for taxable life insurance policies, which is not included in the taxable value as determined under Rule 32(4) of CGST Rules , cannot be considered as pertaining to a non-taxable or exempt supply and therefore, there is no requirement of reversal of input tax credit as per provisions of Rule 42 or rule 43 of CGST Rules , read with Section 17(1) (2) of CGST Act , in respect of the said amount. Example :- Max L i f e Insurance Company Ltd. (MLICL) has charged gross premium of Rs. 1 8 0 lakh from policy holders with respect to life insurance policies in the 2022-23; out of which Rs. 10 0 l a k h h av e been allocated for investment on behalf of the policy holders. C o m put e t he value of supply of life insurance services provided by MLICL. ( i ) i f the amount allocated for investment has been intimated by MLICL to policy holders at the time of supply of service. ( i i ) if the amount allocated for investment has not been intimated by MLICL to policy holders at the time of providing of service. ( i i i ) if the gross premium charged by ALICL from policy holders is only towards risk cover. No te : MLICL has started its operations in the year 2022-23. Thus, the entire gross premium of Rs. 1 8 0 lakh is the premium for the first year of all the policies. ALICL has not issued any single premium annuity policy. In this case value of supply of life insurance services provided by MLICL in financial year 2020-21 will be computed as follows: (i) Amount allocated for investment intimated to policy holder at the time of supply of service Value of service = Rs. (180-100) lakh = Rs. 80,00,000 (ii) Amount allocated for investment not intimated to policyholders at the time of supply of service Value of service = 25% of Rs. 180 lakh = Rs. 45,00,000 (iii) Gross premium received is only towards risk cover Value of service = Rs. 180 lakh