The Delhi High Court has quashed the demand order for non-payment of Integrated Goods And Service Tax (IGST) on reinsurance services citing GST Council Recommendation.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the GST Council as well as the Union Government, thus appear to have taken a conscious decision to regularise the period between 01 July 2017 and 26 July 2018. The order relates to the period between 01 July 2017 and 26 July 2018. While it is true that when the order came to be passed, the clarifications had not been rendered, but the demand order would not sustain in light of the stand which has been taken by the department.
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Background
The petitioner/assessee has challenged the order which created a demand for the period 01 July 2017 to 25 July 2018 in respect of non-payment of IGST on reinsurance services.
The petitioner is a leading multinational insurance company which is also registered as a foreign reinsurance branch with the Insurance Regulatory and Development Authority of India. It also holds a registration issued by the Ministry of Corporate Affairs, Government of India under the category of foreign companies.
It had on 28 December 2017 and 15 January 2018 entered into a Facultative Proportional Reinsurance Agreement with the New India Assurance Company, the sixth respondent herein, which is a wholly owned government company and the principal insurer designated for providing health insurance coverage to the residents of the State of Rajasthan under the aegis of the Government Health Insurance Scheme “Bhamashah Swasthya Bima Yojna”.
The petitioner had also entered into a separate Facultative Proportional Reinsurance Agreement with the sixth respondent in relation to health insurance coverage to residents of the State of Maharashtra under the “Rajiv Gandhi Jeevandayee Arogya Yojna/Mahatma Jyotibha Phule Jan Arogya Yojna” on 11 January 2018.
It appears that on 18 January 2018, the GST Council introduced a new entry in Notification No.12/2017 dated 28 June 2017 exempting reinsurance services when offered in relation to government insurance schemes.
A doubt appears to have arisen in light of the amended Serial No.36A while speaking of services by way of reinsurance specifying it to be relatable to Serial Nos. 35 or 36 in the original notification. There was thus, perhaps an inadvertent error in failing to take note of Serial No.40 which too formed part of the original notification dated 28 June 2017.
Upon the apparent error coming to light, yet another amending notification came to be issued on 26 July 2018 and clause (k) of which provided as “(k) against serial number 36A, in the entry in column (3), after figures “36”, the word and figures “or 40” shall be inserted;”
Entry 36A thus came to include Serial No.40 specifically.
The issue which therefore remained for consideration was whether the amendments would be liable to be viewed as curative, and thus being applicable to the period prior to 27 July 2018, the date from which the said notification was stated to be applicable and whether it would clarify the position which would obtain prior.
The aspects ultimately fell for deliberation before the GST Council in its meeting held on 22 June 2024 and in which the recommendations of the Fitment Committee for regularisation of payment of GST on reinsurance services came to be accepted.
A clarificatory Circular came to be issued by the Department of Revenue in the Ministry of Finance on 15 July 2024 and insofar as GST liability on reinsurance. The Clarificatory circular stated that as recommended by the GST Council, GST liability on the services by way of reinsurance of the insurance schemes specified in Sl. Nos. 35 and 36 of notification No. 12/2017-CT(R) dated 28.06.2017 is regularised for the period from 01.07.2017 to 24.01.2018 on ‘as is where is basis.’
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Conclusion
The court allowed the writ petition and quashed the order dated 20 December 2023.
FAQs
What was GST Council’s Recommendation on levy of IGST on reinsurance services?
The GST Council as well as the Union Government accepted the regularisation of payment of GST on reinsurance services.
For which period GST Council regularise the IGST on reinsurance services?
The GST Council as well as the Union Government accepted the regularisation of payment of GST on reinsurance services for the period between 01 July 2017 and 26 July 2018.
Case Details
Case Title: Axa France Vie-India Versus UOI
Case No.: W.P.(C) 4136/2024, CM APPL. 16885-86/2024
Date: 01.10.2024
Counsel For Petitioner: Tarun Gulati, Sandeep Chilana, Priyojee Chatterjee, Pramod
Counsel For Respondent: Ravi Prakash, Isha, Ashu, Taha Yasin, R Ramchandran
