Kerala High Court: GST Exemption on Health Insurance Not Available for Group Policies of Retired Bank Employees

E.P. Gopakumar, A.R. Suryanarayanan, Rajan Samuel, K. Mohanakumaran, Federation of Bank of India Pensioners' & Retirees' Associations, Vinod Mukundan, K. Sasidharan Nair, All India Union Bank Pensioners & Retirees Federation Chennai, Jose P.L., And Others Versus Union of India, Goods & Services Tax Council, Bank of India, Mumbai, Deputy General Manager Hr Department, Bank of India, Indian Banks' Association National Insurance Company Ltd. - 2026 (1) TMI 502 - KERALA HIGH COURT

For the purposes of easy understanding, the article has been divided into parts as follows:

1. Parties
2. Issue involved
3. Role of Indian Banks’ Association (IBA)
4. Relief sought by the Petitioners in the writ petition
5. Objections by the respondent
6. Petitioner grounds
7. Respondent grounds
8. Legal Provisions
   1. IRDAI Rules & Regulations
   2. GST Exemption Notification
9. Discussion and Analysis
   1. Difference between the definition of “Group” as per IRDAI Rules and GST Act
   2. The Policies issued are in “group policies” and shall not be treated as “individual Policy”
10. Conclusion

Parties Involved:

• Petitioners: Retired employees of various banks, members of group health insurance policies
• Insurer: National Insurance Company Limited
• Policy Facilitator: Indian Banks’ Association
• Respondents: Union of India, CGST authorities, insurer, banks

Issue involved:

Whether group health insurance policies obtained through collective bargaining by the Indian Banks’ Association for retired bank employees can be treated as individual policies for claiming GST exemption under Notification dated 17-09-2025?

Role of Indian Banks’ Association (IBA)

1. IBA is a representative body of member banks and the Role of IBA in this case is that of intermediary or facilitator for issuance for group policy.
2. Decides the who is eligible employee whether currently serving or retiree or their spouse.
3. IBA is involved in the following process:
   1. Invited bids from insurance companies
   2. Conducted a competitive selection process
   3. Negotiates Premium rates, Coverage enhancements, Waiting periods, Pre-existing disease coverage
   4. National Insurance Company Limited was selected
   5. The contract was entered into between the said insurer and the Indian Banks Association.
4. In the present case, the scale of coverage is:
   1. 5,75,166 serving employees
   2. 1,51,668 retired employees

Relief sought by the Petitioners in the writ petition

1. Issue directions that levying 18% GST on renewal of their health insurance premium from 01-11-2025 onwards is contrary to the GST exemption notification dated 17-09-2025.
2. To declare that The health insurance policy given to retired employees / family pensioners Falls under the exemption.
3. To issue the directions to the respondents to Stop charging GST on future renewals
4. To refund or adjust the GST component already charged against future premiums

Objections by the respondent:

1. GST exemption applies only to individual health insurance policies, namely:
   1. Individual policies
   2. Family floater policies
   3. Senior citizen policies
2. Group insurance policies were excluded irrespective of the factor whether it is for Serving or retired employees and the same cannot be treated like individual insurance policy.

Petitioner grounds:

1. The definition of “group” as defined in the said Notification does not apply to them and a different conclusion is possible.
2. The Definition of “group” under GST is as follows:
   1. who joined together with a commonality of purpose or for engaging in a common economic activity
   2. other than availing insurance
3. Petitioner states that they have joined together, only for the purpose of availing the insurance and apart from that, there was no commonality of purpose other than availing insurance or they have not engaged in common economic activity.
4. Accordingly, the petitioners contend they do not fit the 'group' definition and should therefore qualify for the exemption. On this basis, they claim entitlement to the GST exemption under the notification, asserting that they are not covered by the exclusion therein.
5. Case laws relied on by the Petitioner:
   1. Achal Industries v. State of Karnataka: The State cannot expand tax liability by implication
   2. ITO v. T.S. Devinatha Nadar: Principle that ambiguity in fiscal provisions should not harm the taxpayer
   3. CESC Ltd. v. Subhas Chandra Bose: Beneficial interpretation of provisions meant to confer benefit
   4. Educational Initiatives Pvt. Ltd. v. Union of India (Gujarat HC): High Court precedent where exemption/benefit was interpreted purposively
6. In the light of the above, the petitioner want to argue that
   1. Respondents cannot stretch the definition of ‘group’ to deny the benefit of exemption to the Petitioners.
   2. Even if we look like a group, in substance we are individual retirees
   3. This GST exemption was meant to benefit individuals and senior citizens — so it should be read liberally

Respondent grounds:

1. Petitioners are not eligible for the exemption
2. Respondents mainly rely on the IRDAI regulation
   1. A group cannot be created only to take insurance
   2. This relationship must be something other than insurance
   3. So the petitioners cannot argue both of these at the same time:
      1. “This is a valid group policy”
      2. “But the group exists only to take insurance”
3. Therefore they are ineligible for exemption

Legal Provisions:

IRDAI Rules & Regulations:

1. As per Clause 7 of the IRDAI (Health Insurance) Regulations, 2016, A group cannot be formed solely for the purpose of availing insurance.
2. There must be a clearly evident relationship between the group members, and the group policyholder. This relationship must be something other than insurance.
3. The Group Medical Insurance scheme in-lieu of Reimbursement of Hospitalisation scheme was introduced as per 10th Bipartite Settlement/7th Joint Note dated 25.05.2015.
4. The said scheme was extended to retired employees and their spouses, with a condition that, the premium will be paid by them.

GST Exemption Notification:

1. Clause 36D of exemption Notification under GST clearly states that
   1. Exemption applies only to health insurance policies of an individual, or an individual and family of the said individual not for a group.
   2. The Explanation clarifies that the exemption shall apply to a contract of insurance where the insured is an individual or an individual and family of the said individual.
2. The Purpose of granting exemption on all individual health insurance policies is to make insurance affordable for the common man and increase the insurance coverage in the country.

Discussion and Analysis:

1. The core contention of the Petitioner is that they are not fit into definition of “group” as group was formed for “purpose of availing insurance” only.
2. In this regard, it is necessary to draw attention towards the definition under both laws and the same is as follows:

Difference between the definition of “Group” as per IRDAI Rules and GST Act

The court held that the inclusion of words “other than availing insurance” under GST is not a defence for the petitioner and the grounds relied on shall not sustain.

The Policies issued are in “group policies” and shall not be treated as “individual Policy”

1. Another ground relied by the Petitioner is that since they don’t fit into “group” under GST, the policies shall be treated as “Individual Policies”.

2. The policies issued to the Petitioner have all the characteristics of a group insurance policy for the following reasons:

• covers a large number of persons who are retired employees of the banks,
• who by themselves form a Group, and
• the benefits of the same were obtained by way of collective bargaining, thereby getting reduced rates.
• Relaxation from certain restrictions that are applicable to the individual policies that provides for medical check-up, exclusion clause regarding pre-existing disease and the waiting period for certain coverages, etc.

3. The benefits of the said collective bargaining are clearly explained in the counter affidavit as follows:

a. Cost Savings Passed to Members

b. Lower Premiums

c. Minimal or No Medical Underwriting

d. Coverage for Pre-existing Conditions

e. Family Coverage

f. Voluntary Top-up Options

g. Streamlined Administration

4. Evidently, in this case, the petitioners have availed advantages as highlighted above, which show a clear distinction between the individual policy and group insurance policy.

5. The relationship between the group members and the group policyholder exists because:

• the members are retirees from various banks, and the relationship arises on account of their prior employment with the banks;
• there is a commonality of purpose behind the members joining together, namely, their post-retirement welfare; and
• the IBA has a recognized responsibility to ensure the welfare of retired bank employees, including by facilitating group insurance benefits.

6. The documents produced and the sequence of events that led to the issuance of the policy also clearly establishes the relationship between the members of the policy and the policyholder. 

7. Therefore, once it is established that the policy was issued in compliance with IRDAI regulations and arose out of collective bargaining for a defined class of retirees, the petitioners’ contention that they are not a ‘group’ becomes legally untenable.

8. The Court held these principles apply only where ambiguity exists; here, the GST notification is crystal clear.

Conclusion:

1. The Kerala High Court held that group health insurance policies negotiated and administered through the Indian Banks’ Association for serving and retired bank employees are genuine group insurance policies under IRDAI regulations.
2. Since the GST exemption under Notification dated 17-09-2025 is expressly confined to individual health insurance contracts, and no ambiguity exists in either the notification or the GST Council’s recommendations, members of such group policies are not entitled to GST exemption.
3. Accordingly, the writ petitions were dismissed and the 18% GST levy was upheld.