GST Circular No 214/2024
Clarification on Reversal of Input Tax Credit for Life Insurance Premiums
The trade and field formations have sought clarification on whether the portion of life insurance premiums not included in the taxable value under Rule 32(4) of the CGST Rules, 2017, should be considered exempt or non-taxable, and if the input tax credit (ITC) related to this portion needs to be reversed.
The Board clarifies that the value of supply for life insurance services is determined by Rule 32(4) of the CGST Rules. This rule allows the deduction of the investment portion from the gross premium for life insurance policies. Life insurance policies, including unit-linked policies, combine insurance with investment components. However, only the risk cover portion is considered taxable, while the investment part is excluded.
Despite the exclusion, this portion is neither exempt nor non-taxable. Therefore, there is no need to reverse the ITC for the investment portion of the premium, as it does not pertain to an exempt or non-taxable supply. Field formations are requested to issue suitable trade notices to publicize this clarification.
