Collection of Premium and GST amount from Employees for Insurance Top up

[Sameer Annigeri]

Company collects Insurance premium amount and GST from employees for TOP UP of the existing Insurance and the same amount will be paid to the insurance company. Following is the example.

Premium amount is 100 and 18 GST is collected from Employees. Total 118 rupees will be paid the insurance company.  Insurance company is issuing invoice with applicable GST @ 18%.

In this case whether company has to pay the GST amount18 rupees to the department which is collected from employee. 

Kindly check and provide the details

[Sadanand Bulbule]

Employer is only a pure agent collecting premium from the employee and remitting to insurer. Since insurer issues policy and charges GST @ 18%,  no further GST liability arises on employee, provided no margin/commission is retained.

[Sameer Annigeri]

Dear Sir, thanks for the reply. The insurance amount will be paid by the Employer to the Insurance Company on behalf of Employees. Afterwards employer is  planning to collect the premium amount and GST amount from the employee. In this case whether GST amount collected from Employee to be paid to the government by employer?

[Sadanand Bulbule]

Best practice:

Employee should recover only the actual insurance premium (on cost-to-cost basis) without charging GST.

If GST is shown/collected separately from the employees, then it must be deposited with Government (even though it was not required in the first place).

[Shilpi Jain]

It does not matter that the amount is collected subsequently from the employee. if the exact amount is collected and paid to the insurance company then there will be no liability on the employer can be regarded as a pure agent.

AI Summary

Pure agent treatment for insurance premiums: employer must deposit GST if it is shown or collected separately.
Where an employer pays insurance premiums on behalf of employees and simply recovers the exact amounts, the employer functions as a pure agent and no additional GST arises so long as no margin is retained. However, if the employer separately shows or collects GST from employees, that GST must be deposited with the government; to maintain pure agent status recoveries should be on a cost to cost basis without separate GST collection or retained commission.