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TMI Blog2024 (7) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State Government/ Police Personnel, employees of electricity department or students. While the former fall under SI. No. 40 and the latter under Sl. No. 6 of the Notification No. 12 /2017-Central Tax (Rate) - In the case of applicant, the supply of insurance is made only to the Government of Tamil Nadu for which total premium is paid by the Government and therefore it would be eligible for exemption under SI. No. 40 of the Notification No. 12/2017-Central Tax (Rate). It may be not relevant to the issue raised by tire applicant but it is to be recorded here that Government of Tamil Nadu is managing the insurance scheme called New Health Insurance Scheme and therefore, the recovery made by the Government from employees/ pensioner would also be exempt, in terms of entry 6 of Notification No. 12/2017-Central Tax (Rate). Exemption status of reinsurance of the health insurance policy - HELD THAT:- The supply of goods or services is not being undertaken or proposed to be undertaken by the applicant as the applicant is the recipient of reinsurance service and the supply is being undertaken or proposed to be undertaken by the suppliers of reinsurance service providers, located in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Tax Act. M/s. United India Insurance Company Limited, No. 24, United India Insurance, 1st Floor, Whites Road, Royapettah, Chennai - 600014 (hereinafter called as 'the Applicant') is engaged in the business of providing all kinds of general insurance including health. They are registered under the GST Acts with GSTIN: 33AAACU5552C1ZQ. 2. The applicant have preferred this application seeking Advance Ruling on the following: 2.1 Taxability Issue (1.1) Do es the health insurance services provided by the Applicant to Tamil Nadu State Government (TNSG) is exempted from GST under the Serial Number 40 of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 and corresponding TNGST Notification (hereinafter jointly referred to as "the Notification")? (1.2) If the Insurance services by the Applicant are held as exempted under Question 1.1 above, then consequently, is reinsurance of the health insurance policy also exempt in accordance with Serial No. 36A of the Notification 12/2017? 2.2 Alternate Questions-Valuation If the Insurance services provided by the Applicant are held by this Hon'ble AAR as "Taxable" under Question 1.1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey had collected and remitted GST on the premium amount from TNSG and attached the Invoice issued to the Service Recipient containing the value of the services and GST charged as Annexure 2. That the TNSG has brought to the attention of the applicant that since the entire premium is paid by the State Government, the service shall be exempt under Serial Number 40 of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 and corresponding TNGST Notification. Specific Facts about the Insurance to TNSG- 4.3 The applicant stated that, the Policy is a health insurance policy of the employees (both retired and present) and also the relatives of such employees for which the premium is paid by the TNSG to the applicant. That each of the Employee, Retiree are given a health card containing their unique reference number and the list of their dependent who are eligible to make the claim. 4.4 The applicant submits that the entire premium is paid by the TNSG directly to the Applicant and the TNSG, for the purposes of full disclosure in this present application, has informed the applicant that it recovers some amount from the State Government Employees ranging from Rs. 300 to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices or both, means- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; 5.4. The applicant submits that clause (a) deals with situation where consideration is present. Clause (b) and (c) deals with situation where consideration is absent. That in the present case, consideration is present and accordingly, Clause (a) is applicable - as per which - the person who is liable to pay the consideration will be treated as the 'Recipient' of the Service. 5.5. The applicant submits that in the present case, TNSG enters into the Policy with the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that in terms of the above SI. No. 36A, any re insurance services of the Insurance Scheme covered under Sl.No 40 is exempt from GST. That in the present case, as stated supra, the Insurance Services by the Applicant to the TNSG are exempt under Sl.No 40 of the Exemption Notification and accordingly, the reinsurance Services are also exempt from GST and consequently no RCM is also applicable wherever the Re-insurer is located outside India. Alternate Question-Valuation 5.11. The applicant further submits that without prejudice, for the sake of argument, it is assumed, but without admitting that it is held that the Insurance Service by the Applicant is taxable, then, only then the interpretation on Valuation arises. If it is held by this Hon'ble AAR that the services are exempt, then this question does not arise. 5.12. The applicant further submitted that in case the transaction is held taxable, the next question is what is the value of the said supply? Section 2 (31) of the Act defines consideration as follows:- "(31) consideration in relation to the supply of goods or services or both includes- (a) Any payment made or to be made, whether in money or otherwise, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provided by the applicant is held as taxable for whatever reason, since the entire money received from the TNSG, it would mean that the same is a subsidy received for covering the health of the employees of the State Government and consequently will be excluded from the valuation. 5.16. The applicant submitted that without prejudice to above contention, at best (from Department perspective) and at worst (from the Applicant perspective), it can be contended that entire amount is not subsidised by the State Government since they receive some amount from their employees. For instance, the amount of premium collected is say Rs. 1,000/- (which is received by the Applicant from the TNSG) and the amount received by the TNSG from their employees, is say Rs. 40/-, then, at the bare minimum, Rs. 960 (Rs. 1000 Less Rs. 40) should be considered as subsidy from the State Government and consequently GST, if any, can be levied only on Rs. 40/- 5.17 The applicant further submitted that as stated supra, since the entire premium amount is only received from the State Government by the Applicant and the employees are not anywhere involved in the said transaction and also that the employees recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies." and submitted that this question arises only when the transaction is regarded as "Taxable" which automatically means that output transaction is not exempt from GST. 5.23. The applicant reproduced the definition of exempt supply as follows:- "(47) "exempt supply" means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply" By mentioning the above, the applicant stated that in terms of Section 2(47) of the Act, an exempt supply means any Supply:- a. Whose Rate of Tax is NIL or b. Exempted under Section 11 of the Act. 5.24. The applicant submitted that in the present case (i.e., the insurance service is held to be taxable), then it attracts 18% Tax rate and hence NIL rate of tax does not apply and further, it is not exempted under Section 11 and consequently it does not fall wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years. * To understand the Sl. No. 40 of the Notification No 12/2017, we have to analyse the aforesaid entry along with current scenario of NHIS. In this NHIS Scheme The Treasuries and Accounts department has collected premium amount for NHIS Scheme from Employee/Pensioners of Government of Tamil Nadu and paid to the Insurance provider i.e., applicant Tvl. United India Insurance Company Limited and applicant has issued invoice to Commissioner of Treasuries and Accounts, Government of Tamil Nadu (Pensioners) and 2).Commissioner of Treasuries and Accounts, Government of Tamil Nadu. Here service provider is Tvl. United India Insurance Company Limited and service recipient is each and every employee/pensioners. Moreover, premium has been paid by each and every employee/pensioners vide their every month salary but not paid by the Government. Government of Tamil Nadu has been collecting money from its service employees/pensioners and has been paying it to service provider (i.e) applicant Tvl. United India Insurance Company Limited which is diametrically opposite to the definition mentioned in Sl. No. 40 of the Notification no 12/2017-Central Tax(Rate), dt: 28.06.2017. * App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayer /applicant/Tvl. United India Insurance Company Limited's claim of exemption for the service provided through NHIS scheme is totally liable to be rejected. * Further it is certified that there is no pendency of proceedings for adjudication on this subject in LTU-DC-II section. It is said that some issues related to re-insurance scheme has been pending before the Central Government GST authorities from the Service Tax Act regime. It has to be verified from the Central Government authorities. 6.3. The Joint Commissioner (ST), Intelligence-II Chennai has also stated that no proceeding relating to the question raised by the applicant is pending in their jurisdiction. 6.4. The concerned Central authority vide letter GEXCOM/TECH/MISC/4603/ 2023-TECH dated 26.01.2024 submitted that the question raised in the application are not pending or has been decided in any proceedings in the case of the applicant and also offered the following comments:- * Comment on Q.1.1 - Services provided to the Central Government, State Government, Union Territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union Territory is Nil rated/ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal hearing and the Authorised Representative reiterated the submissions made in their application. When the members enquired about the names of the specific insurance schemes for which the advance ruling is sought, the AR replied that their query relates only to one scheme, i.e., Tamil Nadu Health Insurance Scheme. The members further enquired as to whether the entire premium is paid by the Tamil Nadu State Government, or whether any subsidy by the Government or subscription from the employees of the State Government are involved in this case. The Authorised Representative replied that the insured in this case is the Tamil Nadu State Government, and that the entire subscription is received from the State Government. In this regard, apart from the submissions made, he undertook to furnish the relevant documents relating to the receipt of premium from the Tamil Nadu State Government within a weeks' time. Accordingly, they furnished the copies of the receipts of premium issued to the Commissioner of Treasuries and Accounts, Government of Tamil Nadu on 12.01.2024. 8.0 DISCUSSION AND FINDINGS: 8.1 We have carefully considered the submissions made by the applicant in their applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40 Heading 9971 or Heading 9991 Services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory. Nil Nil The said entry provides the following conditions to avail exemption:- (i) Provision of service to the State Govt. / Central Govt/ Union Territory. (ii) Service being under any insurance schemes (iii) Premium is paid by the State Govt. / Central Govt./ Union Territory for such insurance scheme. 8.4 To examine further, it is pertinent to examine as to how the Health Insurance scheme is provided by the applicant to the Tamil Nadu State Government. On perusal of the Govt. of Tamil Nadu website (https://www.tn.gov.in/go_view/dept), it is seen that the finance department has made available various G.Os issued by them for New Health Insurance Scheme for their employees and pensioners for which the Government decides vide selection of a suitable Public Sector Health Insurance Company through National Competitive Bidding as in the case of New Health Insurance Scheme, 2014. Accordingly, a notice inviting tender has been issued. The Tende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n where a consideration is payable for the supply of goods or services or both. In the case of the applicant, after due process of tender and entering into an agreement with Tamil Nadu Govt., has provided service under New Health Insurance Scheme to the Tamil Nadu Government, for which consideration is payable by the Tamil Nadu Government. It may be seen that the beneficiaries of the New Health Insurance Scheme has not entered into any contractual agreement with the applicant and hence the recipient of service is the Tamil Nadu Govt, only and the Govt, has accordingly discharged the obligation of consideration by way of premium to the applicant. 8.6 The applicant has also relied upon the Circular No. 16/16/2017-GST, dated 15-11-2017 and the relevant portion is reproduced as under: S.No. Issue Comment 3. Is GST leviable on General Insurance policies provided by a State Government to employees of the State government/ Police personnel, employees of Electricity Department or students of colleges/ private schools etc. (a) where premium is paid by State Government and (b) where premium is paid by employees, students etc.? It is hereby clarified that services provided to the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnel, employees of Electricity Department or students are exempt vide entry 6 of notification No. 12/2017-CT(R) which exempts Services by Central Government, State Government, Union territory or local authority to individuals. We may clarify accordingly. The relevant minutes of the meeting is also extracted below: Agenda item 6(x): Issues related to rate of tax on certain Services,- 41. Introducing this Agenda item, the Secretary stated that it was proposed to exempt from tax, general insurance policies where total premium was paid by the State Government. It was further proposed to exempt from tax general insurance policy where total premium was paid by employees or by students of colleges/private schools. 41.1. The Secretary stated that with regard to the above, it was proposed to clarify that services provided to the Central Government, State Government, Union Territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union Territory are exempt from GST under serial no. 40 of Notification No. 12/2017-Central Tax (Rate). Further, service provided by the State Government by way of general insurance (managed by governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they avail ITC on the GST paid in the Reinsurance premium (i.e., whether paid by the Domestic Re-insurer or by the Applicant itself under RCM in case of Foreign Re-insurer). 8.11 In this regard we find that the said question, where the applicant receives the reinsurance service from the domestic Re-insurers is outside the scope of Advance Ruling. We like to draw attention to the provisions of Section 95(a) of the CGST Act, 2017, which provides as follows;- 95(a) "advance ruling" means a decision provided by the Authority or the Appellate Authority for the National Appellate Authority] to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 or of section 101C, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant; 8.12 In the aforementioned question, the supply of goods or services is not being undertaken or proposed to be undertaken by the applicant as the applicant is the recipient of reinsurance service and the supply is being undertaken or proposed to be undertaken by the suppliers of reinsurance service providers, located in India. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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