GST on co-insurance premium for the period 01.07.2017 till 31.10.2024-clarification issued!

On the recommendations of the 53rd meeting of the GST Council held in New Delhi on 22nd June 2024, Finance (No.2) Act, 2024 was amended to add co-insurance and reinsurance commission in Schedule III of the CGST Act, 2017 i.e. activities or transactions which shall be treated neither as a supply of goods nor as a supply of services. As a result, GST is not payable on such services as of this date. However, there was confusion regarding GST on co-insurance and reinsurance commission before the effective date of the above amendment viz. 01^st November, 2024. To regularise this issue, CBIC has issued Circular No. 244/01/2025-GST on 28^th January 2025.

Let’s understand the details!

Circular No. 244/01/2025-GST dated 28.01.2025

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GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

(TAX RESEARCH UNIT)

F. No. CBIC-190354/2/2025-TO(TRU-II)-CBEC

New Delhi: 28.01.2025

Circular No. 244/01/2025-GST

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Subject: Regularizing payment of GST on co-insurance premium apportioned by the lead insurer to the co-insurer and on ceding /re-insurance commission deducted from the reinsurance premium paid by the insurer to the reinsurer - reg.

1. Based on the recommendations of the GST Council in its 53rd meeting held on 22nd June, 2024, at New Delhi, and in the exercise of the powers conferred under section 168(1) of the Central Goods and Services Tax Act, 2017, the following clarification is being issued through this Circular:

2. On the recommendations of the 53rd meeting of the GST Council held in New Delhi on 22nd June 2024, the following activities or transactions were included in Schedule III of the CGST Act, 2017 as activities or transactions which shall be treated neither as supply of goods nor as a supply of services:

a) Activity of apportionment of co-insurance premium by the lead insurer to the co-insurer for the insurance services jointly supplied by the lead insurer and the co-insurer to the insured in co-insurance agreements, subject to the condition that the lead insurer pays the Central tax, the State tax, the Union territory tax and the integrated tax on the entire amount of premium paid by the insured.

b) Services by insurer to the reinsurer for which ceding commission or the reinsurance commission is deducted from the reinsurance premium paid by the insurer to the reinsurer, subject to the condition that the Central tax, the State tax, the Union territory tax and the integrated tax is paid by the reinsurer on the gross reinsurance premium payable by the insurer to the reinsurer, inclusive of the said ceding commission or the reinsurance commission.

The above provisions were enacted vide Finance (No. 2) Act, 2024 , and have been brought into force on 01.11.2024 vide Notification No. 17/2024-Central Tax dated 27.09.2024.

3. In its 53rd meeting, the GST Council further recommended that the payment of GST on the activities or transactions, as specified in paragraph 2 above, may be regularized for the past period, i.e. from 01.07.2017 to the effective date of amendments in the CGST Act, on 'as is where is' basis.

4. Thus, as recommended by the 53rd GST Council, the payment of GST on the activities or transactions specified in paragraph 2 above is regularized for the period 01.07.2017 to 31.10.2024, on 'as is where is' basis.

5. Difficulties, if any, in the implementation of this circular may be brought to the notice of the Board.

(Sachin Jain)

Joint Secretary, TRU-II

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Key Highlights of the Circular

• Finance (No.2) Act, 2024 brought the following services in Schedule III of the CGST Act, 2017 exempting them from the payment of GST:

1. The activity of apportionment of co-insurance premium by the lead insurer to the co-insurer for the insurance services jointly supplied by the lead insurer and the co-insurer to the insured in co-insurance agreements, subject to the condition that the lead insurer pays the Central tax, the State tax, the Union territory tax and the integrated tax on the entire amount of premium paid by the insured.
2. Services by insurer to the reinsurer for which ceding commission or the reinsurance commission is deducted from reinsurance premium paid by the insurer to the reinsurer, subject to the condition that the Central tax, the State tax, the Union territory tax, and the integrated tax is paid by the reinsurer on the gross reinsurance premium payable by the insurer to the reinsurer, inclusive of the said ceding commission or the reinsurance commission.

• By way of Notification No. 17/2024-Central Tax dated 27.09.2024, the effective date for such amendment was declared as 01^st November 2024.
• This led to confusion regarding the GST applicability on such services before 01^st November 2024.
• This circular clarifies that GST on such services for the period 01.07.2017 till 31.10.2024 is regularized on an 'as is where is' basis.
• This means that GST demands for such services will be nullified for such a period. However, Gthe ST already paid will not be refunded.

Conclusion

Circular No. 244/01/2025-GST clarifies that co-insurance premium sharing and reinsurance commission deductions are not taxable under GST as they are now part of Schedule III of the CGST Act. Additionally, past GST payments (from July 1, 2017, to October 31, 2024) have been regularized, ensuring compliance clarity and reducing tax uncertainties for insurers.