2019 (10) TMI 482 - AAR - GST

Recovery of Parental Health Insurance Premium not taxable as service under GST

The authority concluded that the recovery of 50% of the Parental Health Insurance Premium from employees does not amount to a 'supply of service' under ... Supply of services - In the course or furtherance of business - Services by an employee to the employer - Definition of business - Recovery of insurance premium from employeesSupply of services - In the course or furtherance of business - Services by an employee to the employer - Recovery of 50% of parental health insurance premium from employees does not amount to supply of service under Section 7 of the CGST Act, 2017. - HELD THAT: - The applicant, a manufacturer, instituted an optional parental medical insurance scheme under which it paid the entire premium to the insurer and thereafter recovered 50% from employees through salary deductions while bearing the balance. The Authority examined the definition of 'supply' and the statutory definition of 'business' and found that (i) the parental insurance cover is not the applicant's business activity and is not mandated by law, (ii) the insurance service is provided by the insurance company and the applicant merely pays and recovers part of the premium, and (iii) such recovery in the circumstances is not in the course or furtherance of the applicant's business. The Authority further noted that services by an employee to the employer are excluded by Schedule III and relied on a precedent ARA order with identical facts, holding that the employer is not rendering insurance services to employees. Applying these principles, the Authority concluded that the recovery of 50% of the parental health insurance premium from employees is not a taxable supply of services under Section 7. [Paras 5]Answered in the negative; recovery of 50% of parental health insurance premium from employees is not a supply of service under Section 7 of the CGST Act, 2017.Final Conclusion: The Authority ruled that, on the facts and for reasons stated, recovery of 50% of the parental health insurance premium from employees does not constitute a supply of services under the CGST Act, 2017 and accordingly is not taxable as such. Issues Involved:1. Whether recovery of 50% of Parental Health Insurance Premium from employees amounts to 'supply of service' under Section 7 of the Central Goods and Services Tax Act, 2017.Issue-Wise Detailed Analysis:1. Recovery of 50% of Parental Health Insurance Premium from Employees:- Applicant's Contention:- The applicant, a manufacturer and supplier of paints, offers an optional parental insurance scheme to employees, paying the full premium initially and recovering 50% from employees' salaries.- The applicant argues that this recovery does not constitute a 'supply of service' under Section 7 of the CGST Act, 2017, as it is merely a cost recovery and not a service provision.- The term 'supply' under Section 7 includes all forms of supply of goods or services made for consideration in the course or furtherance of business. The applicant contends that the recovery is neither in the course of business nor for its furtherance, as providing insurance is not part of its business activities.- The applicant references Schedule-III of the CGST Act, which excludes services by an employee to an employer in the course of employment from being considered as supply.2. Concerned Officer's Contention:- The officer concurs with the applicant, noting that the recovery of the insurance premium is in relation to employment and not in the course or furtherance of business.- The officer references an earlier ruling (Advance Ruling No. GST-ARA-36/2018-19/B-110) which held that such recoveries do not constitute a supply of service.3. Authority's Observations:- The authority reviewed the facts, noting that the applicant is not in the business of providing insurance but manufactures paints and coatings.- The insurance service is provided by an insurance company, with the applicant merely recovering part of the premium from employees.- The authority examined the definitions of 'supply' under Section 7 and 'business' under Section 2(17) of the CGST Act and concluded that the recovery of insurance premiums does not meet the criteria for a supply of service.- The authority referenced the similar case of M/s. POSCO India Pune Processing Center Private Limited, which ruled that recovering insurance premiums from employees does not constitute a supply of service.Conclusion:- The authority ruled that the recovery of 50% of the Parental Health Insurance Premium from employees does not amount to a 'supply of service' under Section 7 of the CGST Act, 2017.Order:- The question of whether the recovery of 50% of the Parental Health Insurance Premium from employees amounts to a 'supply of service' under Section 7 of the CGST Act, 2017, is answered in the negative.