Many retired bank employees had gone to the Kerala High Court asking for GST (tax) to be removed from the health insurance premium they pay under a special insurance scheme arranged by the Indian Banks’ Association (IBA).
The GST Council had already removed GST on individual health insurance policies. Retired bankers argued that their health insurance is also essentially individual insurance, even though it is arranged collectively through the Indian Banks’ Association (IBA). They felt that this small difference in arrangement should not disqualify them from the exemption. They also pointed out that most retired bankers are senior citizens living on pensions, so continuing to charge GST places an extra financial burden on them and goes against the spirit of the exemption
High Court’s Decision:
The High Court rejected their request. The judge said that GST tax relief is meant only for personal (individual) health insurance policies—the kind a person buys on their own.
But retired bank employees’ health insurance is not treated as an individual policy. Even though it covers individuals this insurance scheme is a group policy, not an individual one. The policy exists because the IBA negotiated the terms with the insurance company on behalf of all retirees collectively, and not because each retiree individually negotiated or purchased the insurance policy on their own.
Because of this collective bargaining, retirees get lower premiums and extra benefits that normal individual policyholders don’t get. And since the policy is a group policy, GST exemption (which applies only to individual policies) does not apply.
Why this was disappointing?
Earlier, in October, the High Court had temporarily stayed the levy of GST on these insurance policies, which gave hope to the retirees. Around 1.5 lakh retired bankers are covered under this scheme, so the decision impacts a large number of elderly people. Retiree associations continue to maintain that the policy is individual in nature since each retiree pays the premium for their own coverage. They believe that the High Court’s decision can be challenged and are now considering filing an appeal.
Tax experts say that under the current rules, GST exemption is clearly allowed only for individual health insurance policies and not for group policies. However, they also feel that from a fairness and social welfare point of view, senior citizens such as retired bankers should get some relief. In their view, exempting these retirees would be in line with the intention behind the GST Council’s decision to help individuals, even if the law does not strictly allow it right now.
Many people think it is unfair to charge GST on health insurance for elderly retirees.
