Clarification on ITC Reversal Requirement for Non-Taxable Portion of Life Insurance Premiums

Last updated: 27 June 2024

Notice Date : 26 June 2024

Quick Summary

This notification clarifies the requirement for reversing input tax credit (ITC) on the portion of life insurance premiums that are not subject to tax under Rule 32(4) of the CGST Rules, 2017. It addresses queries from the trade and tax authorities regarding whether this non-taxable portion is considered an exempt or non-taxable supply, and if ITC availed on it needs to be reversed. The Central Board of Indirect Taxes and Customs (CBIC) issues this clarification to ensure consistent application of GST law.

F.No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****

North Block, New Delhi
Dated the 26th June, 2024

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification on the requirement of reversal of input tax credit in respect of the portion of the premium for life insurance policies which is not included in taxable value-reg.

Representations have been received from the trade and field formations seeking clarification on the issue as to whether the amount of insurance premium, which is not included in the taxable value as per Rule 32(4) of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the “CGST Rules”) applicable for life insurance business, will be treated as pertaining to an exempt supply/ non-taxable supply and whether the input tax credit availed in respect of such amount shall be required to be reversed or not.

2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”), hereby clarifies the issues as under

For full notification please refer to the attachment

FAQ :

The notification clarifies whether the non-taxable portion of life insurance premiums, as per Rule 32(4) of the CGST Rules, 2017, is considered an exempt supply and if input tax credit (ITC) availed on it needs to be reversed.

This clarification is intended for Principal Chief Commissioners, Chief Commissioners, Principal Commissioners, Commissioners of Central Tax, and Principal Directors General/Directors General.

Rule 32(4) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) is mentioned, which applies to life insurance business and determines the taxable value of premiums.

The purpose is to clarify the requirement of ITC reversal for the non-taxable portion of life insurance premiums and to ensure uniform implementation of GST law across all field formations.

The notification was issued by the Central Board of Indirect Taxes and Customs (CBIC), under the Ministry of Finance (Department of Revenue), Government of India.