13 Feb GST Council likely to discuss co-insurance, re-insurance issues at next meet
The Goods and Services Tax (GST) Council is expected to address co-insurance and re-insurance matters in its upcoming meeting following examination by the fitment committee. Instances of tax evasion have emerged in the insurance sector due to certain industry practices, prompting the need for clarification, the official elaborated.
The GST authorities have concluded investigations into tax evasion by insurance companies, focusing on three areas: higher commission payments to agents, coinsurance, and reinsurance. Notices have been issued to insurance firms in all three cases.
The official informed that industry practices regarding coinsurance and reinsurance may be taken up by the GST Council for discussion. The fitment committee will likely examine these matters and present them to the Council at its next meeting. Stakeholders have also submitted representations seeking clarification from the GST authorities on these issues.
The next meeting of the GST Council is anticipated to occur before the end of March, with certain matters slated for clarification, as per the official.
Coinsurance involves multiple insurance companies sharing liabilities in varying proportions. The prevailing practice is for only one company to pay GST, necessitating clarification that each insurer must pay GST proportionately.
In reinsurance, an insurer transfers risk to another company after receiving a premium from the consumer. The Council may deliberate on whether the difference between the consumer payment and the company’s amount constitutes a commission or a discount on the insurance premium.
Notices regarding GST liabilities have been issued to prominent insurance companies. State-owned Life Insurance Corporation of India, Star Health and Allied Insurance, and ICICI Lombard General Insurance are among those who have received notices for non-payment of GST liabilities on coinsurance and reinsurance premiums.
LIC faced a GST notice of Rs 806.3 crore for compliance-related shortcomings in FY 2017-18, while Star Health and Allied Insurance received a notice of Rs 38.99 crore for non-payment of GST liabilities on premiums received under coinsurance arrangements. Similarly, ICICI Lombard General Insurance received a notice for around Rs 1,730 crore for non-payment of GST on coinsurance and reinsurance premiums from July 2017 to March 2022.
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