M/s. Jotun India Pvt. Ltd. (“the Applicant”) is a leading manufacturer, supplier and exporter of paints and powder coatings. The Applicant supplies paints and coatings that are specially designed for unique conditions to the various customers.
The Applicant has introduced parental insurance scheme for employees’ parents. It is an optional scheme provided to the employees. As per this scheme, the Applicant initially pays the entire premium along with taxes to the insurance company. The insurance company issues the premium receipt in the name of the Applicant.
In case of the employees who opt for the parental insurance scheme, the Applicant recovers 50 per cent of the premium in one to three instalments from the salaries and the balance 50 per cent amount is borne by the Applicant.
The Applicant is before the Authority for Advance Ruling, Maharashtra (“AAR Maharashtra”) seeking a ruling as to, “Whether recovery of 50% of Parental Health Insurance Premium from employees’ amounts to “supply of services” under Section 7 of the Central Goods and Service Tax Act, 2017 (“CGST Act”)?”
In order to constitute a ‘supply’, the following elements are required to be satisfied:
- there should be supply of “goods” and / or services”;
- supply is for a “consideration”;
- supply is made “in the course or furtherance of business”:
The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of 50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business.
The AAR Maharashtra in Order No. GST-ARA-19/2019-20/B-108 dated October 04, 2019 held that:
From the reading of the definition of ‘supply’ and ‘business’ as defined the CGST Act, we find that the activity undertaken by the applicant, like providing of mediclaim policy for the employees’ parent through insurance company, neither satisfies conditions of Section 7 to be held as “supply of service” nor it is covered under the term “business” defined under Section 2(17) of CGST ACT 2017. Hence, we find that applicant is not rendering any services of health insurance to their employees’ parent and there is no supply of services in the instant case of transaction between employer and employee.
Further, in case of M/s. POSCO India Pune Processing Center Private Limited [Order NO.GST-ARA-36/2018-19/B-110 Mumbai dated September 07, 2018 wherein facts were identical and similar to that of the facts of the Applicant, AAR Maharashtra ruled that, “they are not rendering any service of health insurance to their employees and hence, there is no supply of services in the instant case”. Considering the similar nature of facts and earlier ruling, as referred above, the same ruling is confirmed in this matter also.