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Tax demand on reinsurance services quashed after GST Council amendments regularized disputed period under Section 168A The Delhi HC quashed N/N. 09/2023 and N/N. 56 issued under Section 168A of the Central Goods and Services Tax Act, 2017 demanding IGST on reinsurance ...
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Tax demand on reinsurance services quashed after GST Council amendments regularized disputed period under Section 168A
The Delhi HC quashed N/N. 09/2023 and N/N. 56 issued under Section 168A of the Central Goods and Services Tax Act, 2017 demanding IGST on reinsurance services for the period 01 July 2017 to 25 July 2018. The petitioner, a multinational insurance company registered with IRDAI as a foreign reinsurance branch, challenged the demand. The court held that subsequent amendments by the GST Council and Union Government regularized the period between 01 July 2017 and 26 July 2018, making the impugned order dated 20 December 2023 unsustainable. The petition was allowed.
Issues: Challenge to Notification No. 14/2018-Central Tax (Rate) dated 26.07.2018, excessive delegation in Notification No. 09/2023, quashing of Order-In-Original dated 20.12.2023, jurisdictional issue with Corrigendum dated 06.12.2023, clarification on Notification No. 02/2018 Central Tax (Rate) dated 25.01.2018, regularization of GST liability on reinsurance services.
Analysis: The petitioner challenged Notification No. 14/2018-Central Tax (Rate) dated 26.07.2018, seeking exemption from GST on reinsurance services related to government insurance schemes from 25.01.2018. The petitioner was aggrieved by the demand for non-payment of IGST on reinsurance services from 01 July 2017 to 25 July 2018. The petitioner, a multinational insurance company, had agreements with government companies for health insurance schemes under government initiatives.
The issue arose due to an amendment in Notification No. 12/2017 dated 28 June 2017, exempting reinsurance services related to government insurance schemes. An amendment on 25 January 2018 introduced Entry 36A, creating confusion by not including Serial No. 40. Subsequently, on 26 July 2018, Serial No. 40 was included in Entry 36A, clarifying the exemption for reinsurance services of government insurance schemes.
The matter was deliberated by the GST Council, which recommended regularizing GST payment on reinsurance services from 01 July 2017 to 26 July 2018. A clarificatory Circular was issued on 15 July 2024, confirming the regularization of GST liability on reinsurance of exempt insurance schemes for the said period. The Court upheld the petitioner's claim, quashing the impugned order dated 20 December 2023, and granting consequential reliefs in favor of the petitioner.
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