India’s 53rd GST Council meeting has announced a decision that reinsurance commissions and co-insurance premiums will no longer be considered taxable services, providing significant relief to the insurance and reinsurance industry.
Last year, several top insurance companies reportedly received tax notices for allegedly failing to pay relevant taxes from July 2017 to March 2022.
The GST authorities accused insurers of not paying GST on premiums shared in co-insurance deals and on reinsurance commissions during this period. However, insurers disagreed with this interpretation.
With support from the General Insurance Council and consulting firm E&Y, insurers raised their concerns with the Ministry of Finance and GST authorities.
In its latest decision, the GST Council clarified that premiums shared between insurers in co-insurance agreements and reinsurance commissions between insurers and reinsurers are not taxable.
Furthermore, any past GST liabilities on reinsurance services for specified insurance schemes will be regularised for past periods.
Additionally, retrocession (the reinsurance of reinsurance) will now be exempt from GST under specific conditions.
