The Telangana Appellate Authority of Advance Ruling (AAAR) has ruled that no GST exemption is available on medical insurance premiums taken to provide health insurance to employees, pensioners, and their family members.
The two-member bench of Neetu Prasad and B.V. Siva Naga Kumari has observed that the insurance services for employees and employees' family members received by the appellant are not in direct and proximate relation to the water supply and sewerage-related functions entrusted under Article 243W of the Constitution of India, hence the supplies received by the appellant are not exempted from GST.
The appellant, Hyderabad Metropolitan Water Supply and Sewerage Board, has paid the medical insurance premiums taken to provide health insurance to the employees, pensioners, and their family members, and the vehicle insurance policies taken to provide insurance to the vehicles owned by the Board.
The appellant opined they are exempt from paying GST in view of Entry No. 3 of Notification Number 12/2017, Central Tax (Rate), dated June 28, 2017.
As per the notification, for pure services provided to the Central Government, State Government, or Union territory or a local authority or a government authority in relation to any function entrusted to a panchayat or in relation to any function entrusted to a municipality, the rate of GST is NIL.
The appellant sought an advance ruling on the issue of whether medical insurance premiums were taken to provide health insurance to the employees, pensioners, and their family members, who were eligible for exemption.
The AAR held that the GST exemption will be applicable only when the vehicles are directly used to provide services under Schedule XII of the Constitution. However, GST exemption will not be available in cases where the services are used for the transportation of employees, board members, or other persons with no direct relationship to functions discharged under Article 243W.
The appellant challenged the order of AAR. The appellant contended that the Hyderabad Metropolitan Water Supply and Sewerage Board was constituted on November 1, 1989, under the provisions of the Hyderabad Metropolitan Water Supply and Sewerage Act 1989, with various functions and responsibilities in the Hyderabad Metropolitan Area. The appellant contended that the supply of services is eligible for GST exemption.
The AAAR held that the phrase "in relation to" mentioned in Sl. No. 3 of Central Tax (Rate) Notification No. 12/2017 is to be read as meaning a direct and proximate relationship to any function entrusted to a municipality under Article 243W of the Constitution.
Appellant: M/s. Hyderabad Metropolitan Water Supply And Sewerage Board