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Insurers must pass on the financial benefit of the goods and services tax exemption on reinsurance schemes to beneficiaries and to the State and Central exchequers. This requirement applies to specified insurance schemes approved by the Goods and Services Tax Council. Insurance companies must reduce insurance premia to avoid undue enrichment. The Department and concerned nodal Ministry monitor this reduction. If an insurer does not pass on the necessary benefit, the authority initiates suitable action against the insurance company with the National Anti-Profiteering Authority under Section 171 of the Central Goods and Services Tax Act.
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[Image omitted. See the official document.]
IRDA/F&A/CIR/MISC/052/03/2018
March 27, 2018
To
All Insurers
Sub: Exemption of reinsurance schemes, in respect of specified insurance schemes, from the purview of GST - Reg.
It is informed that the proposal to exempt reinsurance schemes in respect of specified insurance schemes has been approved by the GST Council in its 25th meeting held on 18.01.2018 on the condition that the benefit of reduction in the premium on such Insurance schemes, must be passed on to the beneficiaries and the State and Central exchequers. Insurers shall avoid any undue enrichment on this account. Insurers may note that if necessary benefit on account of reduction in premium is not passed on to the insured / Govt., suitable action against the Insurance Companies may be initiated with National Anti-Profiteering Authority under Section 171 of the CGST Act.
In this regard, a copy of D.O. No. 354/12/2013-TRU dated 24.01.2018 from the Finance Secretary is enclosed herewith, for information and necessary action. All insurers are advised to comply with the above in letter and spirit.
Encl : a/a
(Pravin H Kutumbe) Member (F & I)
F. No. G-14017/20/2017-Ins.II Government of India Ministry of Finance Department of Financial Services (Insurance Division)
2nd floor, Jeevan Deep Building, Parliament Street, New Delhi. Dated: 26th March, 2018
The Chairman IRDAI, Hyderabad
Sir,
Sub: Exemption of reinsurance schemes, in respect of specified insurance schemes, from the purview of GST - reg.
I am directed to inform that the proposal to exempt reinsurance schemes in respect of specified insurance schemes has been approved by the GST Council in its 25th meeting held on 18.01.2018 on the condition that the benefit of reduction in the premium on such Insurance schemes, must be passed on to the beneficiaries and the State and Central exchequers. A copy of DO No. 354/12/2018-TRU dated 24th January, 2018 from the Finance Secretary in this regard is enclosed herewith, for necessary action.
Encl.: as above
Yours faithfully,
(K. B. Nayyar) Under Secretary (Insurance-II) Tel: 011-23748759
[Image omitted. See the official document.]
D.O. No. 354/12/2013-TRU
24th January, 2018
Dear Rajiv,
Kindly refer to your D.O. letter No. 1/Secy (FS) /2017 dated 20.12.2017 seeking examination of proposals for ease of living of senior citizens and proposals relating to insurance, specifically Pradhan Mantri Fasal Bima Yojana (PMFBY).
Considering the fact that no GST is payable on insurance premium of such schemes and the GST paid on the re-insurance is included in the cost of insurance premium charged by the Insurance Companies from the beneficiaries and also shared between the Centre and State Governments, the proposal to exempt reinsurance schemes in respect of specified insurance schemes has been approved by the GST Council in its 25th meeting held at New Delhi on 18.01.2018. A list of the insurance schemes which are exempt under GST and whose reinsurance have also been exempted from GST is enclosed in the Annexure attached.
As you are well aware, re-insurance service is input service to the insurance company. So, the exemption to re-insurance would virtually zero rate the insurance services in respect of the above-mentioned schemes. The proposal was recommended by the Fitment Committee on the condition that the benefit of reduction in the premium on such Insurance Schemes, must be passed on to the beneficiaries and the State and Central exchequers. Since for payment of premium for the exempted Insurance Schemes, substantial budgetary allocation is made by the Government, it may be ensured that the insurance premia are reduced by Insurance Companies. This may be monitored by the Department and concerned nodal Ministry to avoid any undue enrichment to the Insurance Companies. If necessary benefit on account of reduction in premium is not passed on to the insured/ Govt., suitable action against the Insurance companies may be initiated with National Anti-Profiteering Authority under section 171 of the CGST Act.
With regards,
Yours sincerely,
(Hasmukh Adhia)
Shri Rajiv Kumar, Secrétary, Department of Financial Services, 3rd Floor, Jeevan Deep Building, Sansad Marg, New Delhi - 110001.
Annexure
Services of general insurance business provided under following schemes is exempted under GST
