The Kerala High Court (Ernakulam Bench) has ruled that the exemption from GST as per notification No.16/2025- Central Tax (Rate); G.S.R. 666(E) dated 17.09.2025 is intended to cover individual policies alone and not the group insurance policies issued based on the understanding reached between the Indian Banks’ Association and the Insurance Company through collective bargaining.
The Court clarified that since the IRDAI Regulations does not contemplate for a policy in respect of a group which is formed solely for the purpose of insurance coverage, the policies which are the subject matter in these petitions, cannot be construed as policies, that are issued for a group, which are solely constituted for the purpose of insurance coverage.
A Single Judge Bench of Justice Ziyad Rahman A.A. meticulously examined Clause 36D of the notification, which grants the exemption to an insured who is “not a group”, and an accompanying explanation clarifying its application to contracts where the insured is an “individual, or an individual and family of the said individual”.
The Bench noted that the recommendations of the 56th GST Council meeting explicitly aimed to make insurance more affordable for the common man by exempting individual health insurance policies, reinforcing the legislative intent to exclude group policies.
The Bench also observed that the policies in question exhibited all characteristics of a group policy, such as collective bargaining by the IBA, lower premiums, minimal medical underwriting, and coverage for pre-existing conditions, benefits not available to individual policyholders.
Reference was made to the clear language of Clause 36D of the notification and its explanatory note, which limits the exemption to individuals and their families. The policies in question are unequivocally group insurance policies, evidenced by their procurement through collective bargaining by the Indian Banks’ Association, which resulted in preferential terms not available in the retail market.
The Bench therefore concluded that tax exemption clauses must be strictly interpreted, and any ambiguity must be resolved in favour of the State, not the taxpayer. In this instance, the Bench found no ambiguity in the notification’s intent to exclude group policies from the exemption.
Briefly, the petitioners are retired employees of various banks and members of group health insurance policies issued by the National Insurance Company Limited. The central issue revolves around their entitlement to an exemption from the payment of Goods and Services Tax (GST) on the premiums paid for these policies. The petitioners’ claim is based on the notification G.S.R. 666(E) dated 17.09.2025, issued by the Government of India, which introduced certain exemptions from GST for health insurance policies following recommendations from the GST Council. Despite this notification, the insurer, the respective banks, and the Indian Banks’ Association (IBA) insisted on the collection of the GST with the premium.
Consequently, the petitioners filed petitions seeking a declaration that the levy of 18% GST on the renewal of their health insurance policies is illegal and ultra vires the GST Council’s decision and the subsequent notification. They also sought a refund of any GST already collected. The group medical insurance scheme was initially introduced for serving employees under the 10th Bipartite Settlement/7th Joint Note and was later extended to retired employees, who were required to pay the premium themselves.
Appearances:
Advocates V.K. Prasad and Josna. C.F., for the Petitioner/ Taxpayer
Senior Advocate George Cherian, along with Advocates Praveen K.S., P.R. Sreejith, V. Girishkumar, P. Fazil, Jithin Paul Varghese, Saju Thaliath, C. Prabitha, Fadil Fazil, Aswathy Jayachandran, and Akshaya Thomas, for the Respondents/ Revenue
