Bombay High Court Halts GST Claims on Co-Insurance Premiums, Providing Relief to Insurers, ETCFO
Mumbai: The Bombay High Court has granted temporary relief to a batch of insurance companies by staying GST demands raised on co-insurance premium and ceding commission, holding that the levy was prima facie contrary to circulars issued by the Central Board of Indirect Taxes and Customs (CBIC).
ICICI Lombard General Insurance, Aditya Birla Health Insurance, SBI General Insurance Company and Tata AIG General Insurance were among the insurers that had approached the court, challenging orders confirming the GST demands passed by GST authorities, including in Palghar, Maharashtra.
Senior advocates Arvind Datar and Rohan Shah, appearing for the petitioners, contended that the demands were in clear violation of CBIC circulars dated October 11, 2024 and January 28, 2025, which were issued pursuant to decisions made by the GST Council. The council has also been impleaded as a party to the petitions.
The petitioners argued that similar GST demands had been dropped by jurisdictional officers in at least six cases in Meerut, Delhi, Pune and Mumbai in accordance with the CBIC circulars. One such order was placed on record before the court to demonstrate what was described as a consistent departmental approach elsewhere.
They further submitted that the Palghar Commissionerate had taken a contrary view by confirming the demands, resulting in unequal treatment of taxpayers.
On Wednesday, the counsel for the respondents sought time to file reply affidavits and the court granted time till February 12. The ad-interim stay will be in place until the next date of hearing.
The Directorate General of GST Intelligence had probed more than two dozen insurance companies for allegedly floating shell entities to pay excess commissions and booking such payments under other expense heads to reduce GST liability.
The Income Tax Department also conducted parallel investigations into alleged tax evasion and violations of Insurance Regulatory and Development Authority of India rules. While the GST probe focused on alleged fake input tax credit and misclassification of expenses, the income tax investigation examined suspected tax evasion arising from commission payments in excess of regulatory limits.
The HC order provided much-needed relief to the industry, said Amit Maheshwari, managing partner at CA firm AKM Global. “The court’s intervention reinforces the importance of predictable tax administration and consistent field-level implementation,” he said.
