Appellant: M/s. Hyderabad Metropolitan Water Supply And Sewerage Board
Summary
The Telangana Appellate Authority of Advance Ruling (AAAR) has ruled that there is no GST exemption for medical insurance premiums used to provide health insurance to employees, pensioners, and their family members. The appellant, the Hyderabad Metropolitan Water Supply and Sewerage Board, remitted medical insurance premiums and vehicle insurance policies to cover health insurance for its employees, pensioners, and their dependents. The AAR determined that the GST exemption will only apply when vehicles are explicitly used to provide services under Schedule XII of the Constitution. The appellant argued that the provision of services is eligible for GST exemption, but the AAAR interpreted the phrase “in relation to” as indicating a direct and proximate relationship to any function entrusted to a municipality under Article 243W of the Constitution.
About the case
The Telangana Appellate Authority of Advance Ruling (AAAR) has determined that there is no GST exemption available for medical insurance premiums that are used to provide health insurance to employees, pensioners, and their family members.
The appellant’s insurance services for employees and employees’ family members are not directly and approximately related to the water supply and sewerage-related functions entrusted under Article 243W of the Constitution of India, as observed by the two-member bench of Neetu Prasad and B.V. Siva Naga Kumari. Consequently, the appellant’s supplies are not exempt from GST.
The Hyderabad Metropolitan Water Supply and Sewerage Board, the appellant, has remitted the medical insurance premiums collected to cover the health insurance of its employees, pensioners, and their dependents, as well as the vehicle insurance policies acquired to protect the Board’s vehicles.
In accordance with Entry No. 3 of Notification Number 12/2017, Central Tax (Rate), dated June 28, 2017, the appellant believed that they were exempt from paying GST.
The rate of GST is zero for pure services provided to the Central Government, State Government, Union territory, or a local authority or government authority in relation to any function entrusted to a panchayat or municipality, as per the notification.
The appellant requested an advance ruling regarding the deduction of medical insurance premiums to provide health insurance to employees, beneficiaries, and their family members who were eligible for exemption.
The AAR determined that the GST exemption will be applicable solely when the vehicles are explicitly utilized to provide services under Schedule XII of the Constitution. Nevertheless, the GST exemption will not be applicable in instances where the services are utilized for the transportation of employees, board members, or other individuals who are not directly associated with the functions performed under Article 243W.
The appellant raised a challenge to the AAR’s order. The appellant argued that the Hyderabad Metropolitan Water Supply and Sewerage Board was established on November 1, 1989, in accordance with the Hyderabad Metropolitan Water Supply and Sewerage Act 1989, and that it was responsible for a variety of functions and responsibilities within the Hyderabad Metropolitan Area. The appellant argued that the provision of services is eligible for GST exemption.
The AAAR determined that the phrase “in relation to” in Sl. No. 3 of Central Tax (Rate) Notification No. 12/2017 should be interpreted as indicating a direct and proximate relationship to any function that a municipality is entrusted with under Article 243W of the Constitution.
