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AAR rules GST payable on medical health insurance premium for employees

The AAR noted that there is no relation between the insurance services procured by the applicant and the functions discharged by them under Article 243WPremium
The AAR noted that there is no relation between the insurance services procured by the applicant and the functions discharged by them under Article 243W

  • The Telangana Authority of Advance Ruling (AAR) has ruled that GST is payable on medical health insurance premiums for employees even by municipal and other statutory bodies that get tax exemption on various services they provide

AAR rules GST payable on Medical Health Insurance Premium for Employees Medical health insurance premium paid by companies, including statutory bodies for employees would be chargeable with goods and service tax (GST). 

The Telangana Authority of Advance Ruling (AAR) has ruled that GST is payable on medical health insurance premiums for employees even by municipal and other statutory bodies that get tax exemption on various services they provide. The Telangana AAR ruling came on an application filed by M/s. Hyderabad Metropolitan Water Supply and Sewerage Board that wanted to know whether it is liable pay GST on medical insurance premiums it paid to provide health insurance to the employees, pensioners and their family members. 

The application also sought advance ruling on tax applicability on the vehicle insurance policy taken to provide insurance to the vehicles owned by the Board. The AAR ruled that services provided by a municipality under Article 243W of the Constitution of India are eligible for exemption from GST. These include services directly related to the functions enumerated to such bodies and listed under the 12th schedule. 

The AAR noted that there is no relation between the insurance services procured by the applicant and the functions discharged by them under Article 243W: Therefore, these services do not qualify for exemption. In relation to premium paid towards vehicle insurance, the AAR ruled such insurance would qualify for exemption if the vehicle is used to provide statutory functions entrusted to municipalities. 

If such vehicles are used for transportation of employees, board members, or other people, they will not have a direct relationship to the functions discharged under Article 243W. Therefore, it will not qualify for exemption, the AAR ruled.

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