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. The HC held that, under IRDAI (Health Insurance) Regulations, 2016, a group cannot be formed solely to procure insurance and must have an identifiable relationship between members and the group policyholder; issuance by a regulated insurer to a large, relationship-based group indicated compliance with these requirements. The policy arose from a bipartite settlement and collective bargaining through an association, evidencing a genuine group arrangement rather than individual coverage. Consequently, the notification was construed as exempting only individual policies, not such group policies, and the writ petitions were dismissed.
1. ISSUES PRESENTED AND CONSIDERED
1) Whether the GST exemption introduced by the notification dated 17.09.2025 for "service of health insurance business ... where the insured is not a group" extends to premiums paid under bank retirees' group health insurance policies negotiated through a collective arrangement.
2) Whether, on the definition of "group" inserted by the same notification (including the phrase "other than availing insurance"), retired employees covered under the impugned policies can be treated as "not a group" so as to fall within the exemption meant for individual health insurance policies.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Applicability of the 17.09.2025 GST exemption to the impugned health insurance policies
Legal framework (as discussed by the Court): The Court examined the notification dated 17.09.2025 which inserted an exemption entry (clause 36D) for health insurance services "where the insured is not a group," and its accompanying Explanation clarifying that the exemption applies to contracts where the insured is an individual, or an individual and the individual's family. The Court also considered that the notification was issued based on GST Council recommendations referred to in the judgment as intending exemption for individual health insurance policies (including family floater and senior citizen policies).
Interpretation and reasoning: The Court held that both the wording of clause 36D ("insured is not a group") and the Explanation ("for the removal of doubts") decisively confine the exemption to individual contracts (including individual-plus-family). Reading the notification in light of the Council recommendations considered by the Court, the Court found the intent "very specific" and limited to individual health insurance policies, not group policies.
Conclusions: The Court concluded that the impugned policies, being group medical insurance policies, do not qualify for the exemption under clause 36D and remain subject to GST as insisted upon by the insurer and associated entities.
Issue 2: Whether the petitioners could avoid "group" classification under the notification's definition and thereby claim the exemption
Legal framework (as discussed by the Court): The Court examined the inserted definition of "group" for clause 36D, which refers to persons joining with a commonality of purpose or common economic activity "other than availing insurance," and includes employer-employee groups and non employer-employee groups where a clearly evident relationship exists between the master/group policyholder and the members for services/activities other than insurance. The Court also relied on IRDAI regulations discussed in the judgment, particularly the prohibition on issuing group health insurance where the group is formed with the main purpose of availing insurance and the requirement of a clearly evident relationship between group members and the group policyholder.
Interpretation and reasoning: The Court rejected the contention that retirees joined only to obtain insurance and therefore are outside "group" as defined in the notification. It reasoned that (i) the policy was issued by a regulated general insurer and must be presumed compliant with IRDAI rules, including the prohibition against "insurance-only" group formation; (ii) the records showed the policy was obtained through collective bargaining and negotiation, resulting in group-policy characteristics and advantages distinct from individual policies (including pricing and coverage features); and (iii) the scheme originated from an employment-related settlement structure and was extended to retirees as a welfare measure, establishing a relationship and commonality linked to their prior bank employment and the coordinating role of the association acting as intermediary and group policyholder arrangement. The Court held that the additional phrase "other than availing insurance" in the notification's definition did not assist the petitioners because the policy could not legally be one issued to a group formed solely for insurance, and the factual matrix showed an evident relationship and commonality beyond mere insurance purchase.
Conclusions: The Court held that the insured persons under the impugned policies constitute a "group" for clause 36D purposes; therefore, the exemption for "not a group" insureds cannot apply. On this basis, the Court dismissed the challenges seeking non-levy of GST and related reliefs.
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