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: (i) Whether premiums paid towards group health insurance policies obtained through collective bargaining by retired bank employees fall within the exemption from GST conferred by the notification G.S.R. 666(E) dated 17.09.2025 (clause 36D) which, on its face, provides exemption only where the insured is not a group.Issue (i): Whether premiums for the group policies under challenge qualify as exempt health insurance services under clause 36D of the notification G.S.R. 666(E) dated 17.09.2025.Analysis: The legal framework comprises the exemption notification (clause 36D and the definition in clause (zfb)), and the IRDAI regulations governing permissible group policies. Clause 36D and its Explanation limit the exemption to contracts where the insured is an individual or an individual and family. Clause (zfb) defines 'group' as persons joining with a commonality of purpose or for engaging in a common economic activity other than availing insurance. IRDAI regulations prohibit forming a group solely for availing insurance and require an evident relationship between the group policyholder and members; they also identify employer-employee and other established group relationships. The policies in issue were procured through the Indian Banks' Association by collective bargaining, cover a large class of serving and retired employees, and confer benefits (lower premiums, reduced underwriting, broader coverage) characteristic of group insurance rather than individual retail policies. The exemption recommendations in the GST Council's record and the language of clause 36D consistently confine the benefit to individual policies; where exemption provisions are framed and applied to a fiscal exemption, they are interpreted with due regard to their limiting language and purpose. Given that the challenged policies were issued as group policies in accordance with IRDAI regulatory criteria and were obtained through collective negotiation resulting in features distinct from individual policies, the legal instruments relied upon do not support treating these policies as falling within the individual-policy exemption established by clause 36D.Conclusion: The premiums relating to the group health insurance policies obtained through collective bargaining do not qualify for exemption under clause 36D of G.S.R. 666(E) dated 17.09.2025, and the petitioners are not entitled to the benefit of that notification for the policies in question.