2026 (1) TMI 502 - HC - GST

GST exemption for group health insurance formed through association settlement and collective bargaining denied; writ petitions dismissed.

Whether GST exemption under Notification No. 16/2025-Central Tax (Rate) dated 17.9.2025 applied to a group health insurance policy was the dominant issue. ... Group insurance policy Premium - Exemption from payment of GST - applicability of notification published by the Government as per G.S.R. 666(E) dated 17.9.2025 based on the recommendations of the GST Council, by which, certain exemptions were contemplated for health insurance policies, from payment of GST - HELD THAT:- Admittedly, the policy is issued by a general insurance company, which can only issue a policy, as permitted by the IRDAI, the sole regulatory body in this field. As rightly pointed out by the learned Standing Counsel for the respondents, clause 7 of the IRDAI (Health Insurance) Regulations, 2016, specifically prohibits forming of a group with the main purpose of availing itself of an insurance. Thus, the fact that, the policy was issued to a large number of persons extending to more than 1.5 lakhs persons by a general insurance company bound by the regulation issued by the IRDAI, itself indicates that the said policy was issued in terms of the relevant regulations. As mentioned above, the regulation contains a clause prohibiting forming a group, exclusively for the purpose of availing insurance coverage and there must be some relationship between the members of the group and the group policyholder. Therefore, the issuance of policy by following the regulations of IRDAI itself would indicate that the said policy was issued to a group, where, there is an evident relationship between the members of the group and the policyholder. The documents produced before this Court 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. As mentioned above, Ext.P3 would indicate that the scheme of insurance policy itself was introduced as part of 10th Bipartite Settlement/7th Joint Note dated 25.5.2015 and later the benefits of the same were extended to the retired employees. A detailed procedure is followed by the Indian Banks’ Association, which floated a tender to find out an insurer who can provide a better package at a lesser price. Thereafter, a contract was entered into between the said insurer and the Indian Banks Association. Rates of premium were also fixed after such negotiations/proceedings between the Indian Banks Association and the Insurance Company - there is a commonality of purpose behind the join together of the members of the Association and the Indian Banks Association, which is bound to ensure the welfare of the retired employees of the banks, while extending the benefits of group insurance policy. Therefore, under no circumstances, the contentions raised by the petitioners can be accepted. Of course, there could be a doubt with regard to the definition of ‘group’ as contained in Ext.P2, in respect of the groups which are formed solely for the purpose of availing the insurance policy. However, since the IRDAI Regulations does not contemplate for a policy in respect of a group which is formed solely for the purpose of insurance coverage, the policies which are the subject matter in these writ petitions, cannot be construed as policies, that are issued for a group, which are solely constituted for the purpose of insurance coverage - the exemption provided as per the notification No. 16/2025-Central Tax (Rate); G.S.R. 666(E) dated 17.9.2025, is intended to cover the individual policies alone, and not for the group insurance policies issued based on the understanding reached between the Indian Banks Association and the Insurance Company followed by collective bargaining. There are no merits in these writ petitions - petition dismissed. Issues: Whether the petitioners (retired bank employees covered under group health insurance policies) are entitled to exemption from payment of GST on premiums under G.S.R. 666(E) dated 17.9.2025 (notification inserting clause 36D and definition (zfb)).Analysis: The notification (G.S.R. 666(E) dated 17.9.2025) provides exemption only where the insured is not a group and its Explanation clarifies applicability to contracts where the insured is an individual or an individual and family. The definition of 'group' in the notification requires a group of persons who join together with a commonality of purpose or for engaging in a common economic activity other than availing insurance. The IRDAI Regulations (including prohibitions on forming groups solely to avail insurance and requirements of a relationship between group members and the policyholder) and the factual matrix (collective bargaining by Indian Banks' Association, tendering process, fixed premium rates, and benefits such as lower premiums, minimal underwriting and coverage terms) demonstrate that the policies were issued in conformity with IRDAI group policy norms and possess characteristics of group insurance obtained through collective negotiation. The notification was issued pursuant to the GST Council recommendations which expressly intended the exemption for individual health insurance policies (including family floater and senior citizen policies) and not group insurance. There is no ambiguity in clause 36D read with the recommendations; accordingly the exemption cannot be extended to the present group policies.Conclusion: The petitioners are not entitled to exemption under G.S.R. 666(E) dated 17.9.2025 for the group health insurance premiums; the decision is against the petitioners and in favour of the Revenue.