Clarification on the requirement of reversal of input tax credit in respect of the portion of the premium for life insurance policies which is not included in taxable value.

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....olicies which is not included in taxable value-reg. Representations have been received from the trade and field formations seeking clarification on the issue as to whether the amount of insurance premium, which is not included in the taxable value as per Rule 32(4) of Uttar Pradesh Goods and Services Tax Rules, 2017 (hereinafter referred to as the "UPGST Rules") applicable for life insurance business, will be treated as pertaining to an exempt supply/ non-taxable supply and whether the input tax credit availed in respect of such amount shall be required to be reversed or not. 2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Commissioner, in exerci....

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.... employment or of the dependents of such persons; Explanation. -- For the removal of doubts, it is hereby declared that life insurance business shall include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment and a component of insurance issued by an insurer referred to in clause (9) of this section. 2. Life insurance companies are providing service of insuring the life of the insured and in return, are charging consideration in the form of premium from the insured. A number of life insurance companies are providing policies which may consist of a component of investment in addition to the component for the risk cover of the life insurance ....

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....eration i.e. gross premium is towards life insurance services. 2.2 As per section 2(47) of the UPGST Act, exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the "IGST Act"), and includes non- taxable supply. The said definition of exempt supply has the following three limbs: - (a) Supply of service which is nil rated; (b) Supply of service which is wholly exempted from tax under section 11 of UPGST Act or under Section 6 of IGST Act; or (c) Supply of service which is non-taxable supply. 2.2.1. Further, as per section....

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....also not a non-taxable supply. Therefore, just because some amount of consideration is not included in value of taxable supply as per the provisions of the statute, it cannot be said that the said portion of consideration becomes attributable to a non-taxable or exempt supply. 2.2.4 Further, Rule 42 of the UPGST Rules provides for reversal of input tax credit in certain scenarios. As per the said rule, only that input tax credit which attract the provisions of sub-section (1) and sub-section (2) of Section 17 of the UPGST Act needs to be determined and reversed thereof. Further, sub-section (1) and sub-section (2) of Section 17 of the UPGST Act restrict the amount of credit only in a case where the registered person uses the goods or ser....