GST Liability on Senior Citizens' Group Health Insurance Premium Upheld by Kerala High Court

The Kerala High Court, through its ruling in E.P. Gopakumar & Ors. V. Union of India & Ors. (2025) 45 J.K.Jain's GST & VR 1 (Ker), has rejected the plea for GST exemption on health insurance premiums paid by senior citizens under group insurance schemes. The court's decision mandates the full levy of 18% GST on such premiums, distinguishing group insurance arrangements from individual health insurance policies.

The petitioners approached the High Court challenging the applicability of GST on premiums paid under group health insurance policies. The core legal question centered on whether participants in group insurance arrangements qualified for exemption under Notification No. 16/2025-CT(R) dated 17.9.2025. The assesses contended that their association was formed purely to secure insurance benefits and lacked any other common economic purpose or activity, thereby making them eligible for exemption.

Petitioners' Contentions Before the Court

The petitioners advanced several arguments supporting their claim for GST exemption. They emphasized that their collective arrangement served exclusively for obtaining health insurance coverage and involved no other shared economic pursuits or unified objectives. According to their submission, although they procured the policy collectively, they should not be categorized as a 'group' within the meaning of the exemption notification. Consequently, the exclusionary provisions within the notification should not apply to their situation, rendering them eligible for the exemption benefit.

Revenue Department's Position

The respondents countered the petitioners' arguments by highlighting that the participants failed to satisfy the exemption criteria specified in the notification. The Standing Counsel drew judicial attention to the IRDA (Health Insurance) Regulations, 2016, which explicitly prohibit insurers from issuing group health insurance policies where groups are constituted primarily for obtaining insurance coverage. These regulations mandate a clearly identifiable relationship between group members and the group policyholder, as prescribed by the regulatory authority.

Examination of Notification No. 16/2025-CT(R) Dated 17.9.2025

Clause 36D Analysis

The notification contains Clause 36D under Heading 9971, which addresses services related to health insurance business provided by insurers to insured parties who do not constitute a group. The explanation within this clause clarifies that exemption applies exclusively to insurance contracts where the insured comprises an individual or an individual with their family members. For this purpose, family includes all persons insured collectively under one family contract.

This notification was promulgated exercising powers under Section 9(3), Section 9(4), Section 11(1), Section 15(5), and Section 148 of the CGST Act, 2017. The notification introduced amendments to the earlier Notification No. 12/2017 dated 28.6.2017, inserting clause (zfb) which defines 'group' for entries at serial numbers 36C and 36D.

Definition of 'Group' Under Clause (zfb)

The inserted clause (zfb) defines 'group' as persons joining together with shared purpose or engaging in common economic activities beyond merely obtaining insurance coverage. This definition encompasses:

  1. Employer-employee arrangements: Where valid employment relationships exist between the master policyholder and group members per applicable legal provisions
  2. Non-employer-employee arrangements: Where demonstrable relationships exist between the master policyholder and members for services or activities unrelated to insurance procurement

Policy Objective Behind the Amendment

The government issued this notification with the specific objective of exempting GST on individual health insurance policies, including family floater policies and coverage for senior citizens, along with reinsurance thereof. This initiative aims to enhance insurance affordability for common citizens and expand insurance penetration across the country.

Judicial Analysis and Reasoning

Regulatory Compliance Perspective

The court observed that the insurance policy in question was issued by a general insurance company bound by IRDAI regulations. Clause 7 of the IRDAI Reg.2016 specifically prohibits forming groups primarily for securing insurance coverage. Since the policy covered over 1.5 lakh persons and was issued by a regulated entity, the court inferred compliance with IRDAI regulations, indicating the existence of proper group characteristics with evident relationships between members and the policyholder.

Collective Bargaining Benefits

The court examined the specific advantages obtained through the Indian Banks' Association (IBA) collective bargaining process. These benefits demonstrate clear distinctions from individual policies: