ITC on medical insurance allowable under GST ?

[Jasbir Uppal]

Dear professionals,

My query is as per the order issued by Ministry of Home Affairs(MHA) MHA has issued Order No. 40-3/2020-DM-I (A) dated 15th April, 2020. In Clause No. 5 of Annexure II of the order MHA has made medical insurance mandatory for workers. Further MHA has issued clarification via ref: IRDAI/HLT/CIR/MISC/093/04/2020 dated 16th April, 2020. In the said reference the Government has stipulated all industrial and commercial establishments, work places, offices etc. shall made arrangements for implementation of Standard Operating Procedure (SOP) before starting their functioning.

Now, as per Section 17 (5) (a) of CGST Act, 2017 clearly states that the taxpayer is eligible to avail input tax credit if Government has made any service obligatory for an employer. Can we claim ITC on medical insurance paid as per aforementioned order.

Thanks & Regards

J S Uppal

[Rajagopalan Ranganathan]

Sir,

According to second proviso to Section 17 (5) (b) of CGST Act, 2017 as amended by CGST (Amendment) Act, 2018

"Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.”

MHA order cannot be treated as an Act enacted by Parliament. However if the order is issued in exercise of power conferred on the Government by an Act of Parliament then you are eligible to take IT of gst paid on insurance service. Please check whether the order is issued under the provisions of any act of Parliament.

[KASTURI SETHI]

Proviso to Section 17 (5) says,

" Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.]

Emphasis is on the phrases "any law" "for the time being in force". MHA has issued the above orders under Disaster Management Act and these orders are mandatory for all the employers/registered persons/manufacturers. Health crisis i.e.emergency like situation in the whole India. In my view, ITC cannot be denied.

 

[Jasbir Uppal]

Dear Kasturi Sethi

Thank you for your valuable response. As per order issued by MHA is binding up until and unless a notification is issued or any new change is done in the relevant Act.

Thanks & Regards

J S Uppal

[KASTURI SETHI]

Dear Sh.Jasbir Singh Uppal Ji,

In my view, no separate notification is required. However, to be on safer side and for your satisfaction, you may seek clarification from the jurisdictional Commissioner.

[Jasbir Uppal]

Dear Sh.Kasturi Sethi Ji & Sh.Rajagopalan Ranganathan Ji

Thank you for your valuable feedback.

Thanks & Regards

J S Uppal

[Surendra Gupta]

Dear Sir,

The said MHA order has used word 'Worker' for which medical insurance is mandatory. Is worker word would include employees (in any capacity e.g. top management) working in all office.

[KASTURI SETHI]

Sir,

Here, 'workers' stand for manual labourers. Hence no question of being included in the 'Top Management'.

[KASTURI SETHI]

'Worker' is also an employee but of Cadre-IV.

AI Summary

Input tax credit on employer-provided medical insurance hinges on whether the obligation arises under the Disaster Management Act. ITC on employer paid medical insurance depends on the proviso to Section 17(5) permitting credit where a service is obligatory for an employer under any law; if the MHA order mandating insurance is issued under the Disaster Management Act or another empowering statute, ITC is available, otherwise entitlement is doubtful. Employers should verify the statutory basis of the order and may seek a jurisdictional Commissioner's clarification. The scope of 'worker' in the order was discussed as generally referring to manual labour cadres.