Kerala High Court Grants Interim Stay on GST for Retired Bank Employees' Group Health Policies

The Kerala High Court has provided temporary relief to retired bank employees by granting an interim stay order to exempt them from paying the Goods and Services Tax (GST) on premiums for group health insurance policies. This development follows the earlier decision to waive GST on individual and family floater health insurance policies, a move that initially brought widespread relief but overlooked the exclusion of group policies.

The All-India Bank Pensioners and Retirees Confederation was among the first to highlight that retired bankers opting for group health insurance through their association were still being charged the 18% GST. While the stay order offers immediate respite, the final outcome of the court hearing will determine the long-term implications.

The Central Board of Indirect Taxes and Customs (CBIC) had clarified that the GST exemption explicitly applied only to 'individual' life and health insurance policies, with group insurance policies remaining subject to the 18% tax. This distinction is crucial, as it means policies taken collectively through a group, even if covering individuals, are not exempt. This policy impacts a large segment of the population, as approximately 82% of individuals, totaling 25.5 crore people in FY24, obtain health coverage through group policies. The gross premium for these group policies amounted to ₹55,666 crore in FY24.

The article argues that if the goal is to encourage health coverage, group health insurance policies should also be encouraged with GST waivers. The potential additional revenue foregone by exempting group policies is estimated at around ₹10,000 crore, which is considered a manageable sum given the urgent need for robust public healthcare security. The rationale often cited for taxing group policies – that they are commercial contracts with benefits like lower premiums and no waiting periods – is countered by the fact that many individuals bear the premium cost out of their own pockets, especially in models covering retired individuals or self-employed persons. The GST Council is urged to consider a complete GST exemption for all group health policies to ensure equitable access to health security.

Impact: This news could lead to significant cost savings for millions of policyholders who rely on group health insurance, potentially increasing demand for such policies. It might also prompt the government to reconsider its GST policy for group insurance, impacting revenue forecasts and the insurance sector's premium collection dynamics. The ruling could set a precedent for other similar cases. Rating: 8/10

Difficult Terms: * GST: Goods and Services Tax, a consumption tax levied on the supply of goods and services. * Interim Stay Order: A temporary court order that suspends a legal process or action until a final decision is made. * Group Health Insurance Policy: An insurance policy obtained by an employer or association for its members, covering multiple individuals under a single plan. * Individual Health Policy: An insurance policy purchased by an individual for themselves and their immediate family. * Family Floater Policy: A health insurance plan where a single premium covers an entire family, with the sum insured shared among them. * CBIC: Central Board of Indirect Taxes and Customs, an Indian government body responsible for administering indirect taxes. * All-India Bank Pensioners and Retirees Confederation: An organization representing retired employees of banks in India. * Gross Premium: The total amount of premium collected by an insurance company before deducting any expenses or claims. * Input Tax Credit (ITC): A tax system where businesses can claim credit for the taxes they have paid on inputs used in their business operations. * Public Healthcare System: The healthcare services provided or funded by the government for its citizens.