The Bombay High Court stayed GST demands running into crores, granting interim relief to multiple insurers in a dispute over taxation of co-insurance premiums. Beneficiaries include New India Assurance, ICICI Lombard, Tata AIG, SBI General, and other insurance companies.
MUMBAI: The Bombay High Court has granted relief to several insurance companies by suspending GST demands amounting to crores of rupees in a dispute regarding co-insurance premiums.
The relief was extended to insurers including 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.
Factual Background of the Case:
The case involves significant financial implications, with GST demands against ICICI Lombard alone exceeding Rs 17,000 crore. The company informed exchanges in September last year that the Additional Commissioner of CGST & Central Excise, Palghar, issued a fresh order on September 29, 2025, confirming a tax demand of Rs 1,728.86 crore, alongside a penalty of Rs 172.89 crore and interest under Section 50 of the CGST Act, 2017, for the period from July 2017 to March 2022.
The Bombay High Court had previously instructed the GST authorities to reconsider the matter afresh. The GST demand pertains to the fiscal years 2018 to 2022 and relates to co-insurance premiums and reinsurance commissions. A final ruling from the High Court is anticipated to provide clarity for the entire insurance sector.
In large insurance policies, risk is frequently shared among multiple insurers, a process known as co-insurance. In these arrangements, one insurer acts as the lead insurer, collects the full premium from the customer, and subsequently shares a portion of that premium with the other involved insurers.
GST authorities have demanded an 18 percent GST on the portion of the premium shared with other insurers and on commissions paid in reinsurance arrangements. The insurers contended that this portion should not be taxed again, as GST has already been paid on the full premium collected from customers.
Arguments of Parties and Decision of the Court:
The insurance companies that approached the Bombay High Court argued that their internal premium-sharing arrangements do not constitute a sale or service under GST law. They claimed that the GST demands contradict the Central Board of Indirect Taxes and Customs (CBIC) circulars issued on October 11, 2024, and January 28, 2025, which were based on a decision by the GST Council and clearly state that such transactions are non-taxable.
The insurers pointed out that in at least six similar cases across Meerut, Delhi, Pune, and Mumbai, the GST authorities had dropped identical demands. Despite this, the Additional Commissioner of GST in Palghar maintained a contrary position and confirmed the demands.
After hearing arguments from senior advocates Arvind Datar and Rohan Shah representing the insurers, the High Court concluded that the petitions present common legal and factual issues warranting interim protection.
In its order, the court 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.”
Staying GST demands exceeding Rs 10,000 crore raised against 13 insurance companies in connection with co-insurance premiums and ceding commissions, the court observed that CBIC circulars issued pursuant to GST Council recommendations expressly keep such transactions outside the scope of GST.
The matter is listed for further hearing on February 18. Co-insurance involves sharing insurance risk among multiple insurers, while a ceding commission refers to the amount paid by a reinsurer to the insurer transferring the risk.
The court directed the affidavit from the CBIC and other parties involved to be filed by February 12.