The Bombay High Court has given a relief to several insurance companies by putting GST demands worth crores of rupees on hold in a dispute related to co-insurance premiums. The relief was granted to insurers such as New India Assurance, Aditya Birla Health Insurance, ICICI Lombard, Oriental Insurance, SBI General, Tata AIG, IFFCO Tokio General, Universal Sompo, Generali Central Insurance, Bharti Management Services Limited and others.
What Bombay HC said in order?
After hearing senior advocates Arvind Datar and Rohan Shah for the insurers, the High Court said that the petitions raise common questions of law and facts and deserve interim protection. HC in its order noted, “Considering the averments as made in the petitions and after hearing the learned counsel for the parties, we are of the opinion that an ad-interim protection needs to be granted to the Petitioners. We accordingly order that there shall be an ad-interim stay to the respective impugned orders, subject matter of each of the Writ Petitions till the adjourned date of hearing”. The matter will be next heard on February 18. HC directed that affidavit of the CBIC and other parties impleaded in the matter will have to filed by February 12.
What insurers argued?
The insurance companies who moved to Bombay HC said in their plea that, these internal premium-sharing arrangements are not a sale or service under GST law and GST demands are against the Central Board of Indirect taxes and Customs (CBIC) circulars issued on October 11, 2024 and January 28, 2025. These circulars were issued after a decision of the GST Council and clearly state that such transactions are not taxable. The submitted that in at least six similar cases in Meerut, Delhi, Pune and Mumbai, GST authorities themselves had dropped identical demands. Despite this, the Palghar Additional Commissioner of GST took a contrary view and confirmed the demands
What is the dispute about?
In large insurance policies, the risk is often shared by more than one insurer. This arrangement is called co-insurance. One insurer acts as the lead insurer, collects the full premium from the customer, and then shares a part of that premium with other insurers involved. GST authorities had demanded 18 percent GST on the portion of premium shared with other insurers, and commissions paid in reinsurance arrangements. Insurers argued that this should not be taxed again, because GST is already paid on the full premium collected from the customer.
Why is this important?
The case involves huge sums of money. For example, GST demands against ICICI Lombard alone run into more than Rs 17,000 crore. Company in its filing in September last year had informed the exchanges that Additional Commissioner, CGST & Central Excise, Palghar, passed a fresh order on September 29, 2025, again confirming the same tax demand of Rs 1,728.86 crore and a penalty of Rs 172.89 crore and interest u/s 50 of CGST Act, 2017 for the period July 2017 to March 2022. Earlier Bombay HC had directed for GST authorities to hear the matter a fresh. The GST demand was for the period of FY18–FY22 relating to co-insurance premium and reinsurance commission. The final decision of HC is expected to bring clarity for the entire insurance sector.
What is the Expert View?
Expert view is that, the stay will help preserve cash flows and reinforces the importance of consistent implementation of the CBIC circular, while the broader legal issue is being examined on merits. Amit Maheshwari, Managing Partner, AKM Global, a tax and consulting firm states, “The ad-interim stay by the Bombay High Court comes at a critical juncture for the insurance sector, offering immediate relief from substantial GST demands that have clouded industry operations. The GST Council had already recommended a clear position on co-insurance premium and ceding commission, which was subsequently implemented through CBIC circular clarifications.” He further adds, “The order reinforces that such circular-based guidance cannot be disregarded in assessment proceedings. Notably, the petitioners have pointed out that in six similar cases the department dropped comparable demands in line with the Circulars, and have sought that these orders be placed on record, as the impugned orders take a contrary view”.
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