India's GST council to clarify reinsurance stance in upcoming meeting

India’s GST council to clarify reinsurance stance in upcoming meeting | Insurance Business Canada

Reinsurance

India’s GST council to clarify reinsurance stance in upcoming meeting

Decision expected to provide some relief for reinsurers

Reinsurance

By
Kenneth Araullo

The GST Council of India is set to clarify that reinsurance is not a supply of service at an upcoming meeting, according to a report.

As per Moneycontrol, the council is also expected to address the GST applicable on co-insurance, according to a government official.

In an effort to avoid disrupting insurance industry practices, the council will likely discuss issuing a clarification that reinsurance should not be treated as a supply of service, an official said. By definition, an 18% tax is levied on any supply of service.

“The GST’s fitment committee has already discussed the issue and it is proposed that reinsurance should not be treated as supply and hence no GST should be applied on it. The fitment committee proposal will be placed before the GST Council in the June 22 meeting,” the official said.

The official added that while supply may have been made, the GST is already paid on it, so it is proposed to not consider it as supply. This is the conclusion of the fitment committee.

Primary insurers sell insurance policies to clients and assume the risk associated with those policies. To mitigate risk exposure, the primary insurer transfers a portion of this risk to a reinsurer through a reinsurance contract.

In return for assuming part of the risk, the reinsurer collects a premium from the primary insurer, which is typically a percentage of the premiums collected by the primary insurer for the policies being reinsured.