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This circular clarifies GST provisions regarding the taxability of No Claim Bonus offered by insurance companies and the entity-wide applicability of e-invoicing exemptions. Insurance companies deduct No Claim Bonus from the gross premium when no claim occurs. The insured person has no contractual obligation to refrain from lodging claims. No Claim Bonus is not a consideration for a supply by the insured. No Claim Bonus is a permissible discount under section 15 of the CGST Act when recorded in the invoice. GST applies to the actual insurance premium after the No Claim Bonus deduction. E-invoicing exemptions granted under Notification No. 13/2020-Central Tax apply to the entity as a whole and do not depend on the nature of the supply.
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Circular No. 186/18/2022-GST
F. No. CBIC-20001/2/2022 - GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the 27^th December, 2022
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on various issue pertaining to GST-reg.
Representations have been received from the field formations seeking clarification on certain issues with respect to –
| S. No. | Issue | Clarification |
|---|---|---|
| Taxability of No Claim Bonus offered by Insurance companies | ||
| 1. | Whether the deduction on account of No Claim Bonus allowed by the insurance company from the insurance premium payable by the insured, can be considered as consideration for the supply provided by the insured to the insurance company, for agreeing to the obligation to refrain from the act of lodging insurance claim during the previous year(s)? | As per practice prevailing in the insurance sector, the insurance companies deduct No Claim Bonus from the gross insurance premium amount, when no claim is made by the insured person during the previous insurance period(s). The customer/ insured procures insurance policy to indemnify himself from any loss/ injury as per the terms of the policy, and is not under any contractual obligation not to claim insurance claim during any period covered under the policy, in lieu of No Claim Bonus.
It is, therefore, clarified that there is no supply provided by the insured to the insurance company in form of agreeing to the obligation to refrain from the act of lodging insurance claim during the previous year(s) and No Claim Bonus cannot be considered as a consideration for any supply provided by the insured to the insurance company. |
| 2. | Whether No Claim Bonus provided by the insurance company to the insured can be considered as an admissible discount for the purpose of determination of value of supply of insurance service provided by the insurance company to the insured? | As per clause (a) of sub-section (3) of section 15 of the CGST Act, value of supply shall not include any discount which is given before or at the time of supply if such discount has been duly recorded in the invoice issued in respect of such supply.
The insurance companies make the disclosure of the fact of availability of discount in form of No Claim Bonus, subject to certain conditions, to the insured in the insurance policy document itself and also provide the details of the no claim Bonus in the invoices also. The pre-disclosure of NCB amount in the policy documents and specific mention of the discount in form of No Claim Bonus in the invoice is in consonance with the conditions laid down for deduction of discount from the value of supply under clause (a) of sub-section (3) of section 15 of the CGST Act. It is, therefore, clarified that No Claim Bonus (NCB) is a permissible deduction under clause (a) of sub-section (3) of section 15 of the CGST Act for the purpose of calculation of value of supply of the insurance services provided by the insurance company to the insured. Accordingly, where the deduction on account of No claim bonus is provided in the invoice issued by the insurer to the insured, GST shall be leviable on actual insurance premium amount, payable by the policy holders to the insurer, after deduction of No Claim Bonus mentioned on the invoice. |
| Clarification on applicability of e-invoicing w.r.t an entity | ||
| 3. | Whether the exemption from mandatory generation of e-invoices in terms of Notification No. 13/2020-Central Tax, dated 21^st March, 2020, as amended, is available for the entity as whole, or whether the same is available only in respect of certain supplies made by the said entity? | In terms of Notification No. 13/2020-Central Tax dated 21^st March, 2020, as amended, certain entities/sectors have been exempted from mandatory generation of e-invoices as per sub-rule (4) of rule 48 of Central Goods and Services Tax Rules, 2017. It is hereby clarified that the said exemption from generation of e-invoices is for the entity as a whole and is not restricted by the nature of supply being made by the said entity.
Illustration: A Banking Company providing banking services, may also be involved in making supply of some goods, including bullion. The said banking company is exempted from mandatory issuance of e-invoice in terms of Notification No. 13/2020-Central Tax, dated 21^st March, 2020, as amended, for all supplies of goods and services and thus, will not be required to issue e-invoice with respect to any supply made by it. |
It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
