Co-insurance premium and reinsurance commission not treated as supply under GST, refund allowed

The HC ruled that co-insurance premium and reinsurance commission would not be treated as supply under GST and are not liable for GST payment. The petitioner was entitled to refund of deposited amounts. The court distinguished between amounts deposited under court direction versus amounts paid for tax discharge, noting that deposited amounts remained as deposits until final adjudication. Following inclusion of Items 9 and 10 to Schedule III of CGST Act 2017 and related circular, the court set aside impugned orders and allowed the petition for refund.

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Issues:
Whether co-insurance premium and reinsurance commission are considered supply for GST liability.

Analysis:
The judgment involved multiple writ petitions challenging orders related to the treatment of co-insurance premium and reinsurance commission for GST liability. The petitioners argued that these amounts should not be considered as supply and hence not liable for GST. The Senior Counsel for the petitioners referred to recent amendments in Schedule III of the CGST Act, 2017, which excluded these items from the purview of supply. The department issued a circular clarifying the treatment of payments made before the inclusion of these amendments. The petitioners had deposited certain amounts as per court directions, which they argued were not towards tax liability but under protest. The court noted that these deposits were not for tax discharge and should be refunded. The court held that the co-insurance premium and reinsurance commission are not considered supply, entitling the petitioners to a refund.

The court considered the arguments of both parties regarding the nature of the amounts deposited by the petitioners. It was established that the deposits were not for tax liability discharge but made under court directions. The court emphasized that these amounts could only be utilized for tax payment after final adjudication. Referring to the amendments in Schedule III of the CGST Act and the circular, the court concluded that the petitioners were entitled to a refund of the deposited amounts. Therefore, the impugned orders were set aside, and the respondent department was directed to refund the deposited amounts to the petitioners within a specified period.

In conclusion, the court allowed the writ petitions, directing the refund of the deposited amounts to the petitioners. The judgment clarified that the co-insurance premium and reinsurance commission are not considered supply for GST liability. The court emphasized that the amounts deposited by the petitioners were not for tax discharge and should be refunded. The decision was based on the recent amendments in the CGST Act and the circular issued by the department regarding the treatment of payments made before the amendments.

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