GST exemption denied for retired bank employees’ group health insurance; applies only to individual policies
Issue
Whether the exemption from GST on health insurance premiums, as provided under Notification No. 16/2025-CT(Rate) dated 17-09-2025, extends to group insurance policies obtained by retired bank employees through the Indian Banks’ Association (IBA), or if it is restricted solely to individual health insurance policies.
Facts
Beneficiaries: Retired employees of various banks.
Transaction: These retirees paid premiums towards a group health insurance policy.
Intermediary: The policy was negotiated and obtained by the Indian Banks’ Association (IBA) on behalf of the retirees.
Claim: The retirees claimed exemption from GST on these premiums, relying on Notification No. 16/2025-CT(Rate).
Nature of Policy: The policy offered better premium rates and additional benefits (not available to individuals) due to collective bargaining by the IBA.
Revenue’s Stand: The tax authorities contended that the specific exemption notification was intended only for health insurance services provided to an insured who is not a group (i.e., individual policies).
Decision
Interpretation of Notification: The court held that the exemption notification explicitly applies to services provided “where the insured is not a group.”
Group Nature Confirmed: The policy was a result of collective bargaining. The retirees formed a distinct class due to their prior employment. The commonality of purpose (welfare of retired employees) and the role of the IBA in negotiating the deal characterized this as a group policy.
Exclusion from Exemption: Since the policy is a “Group Insurance Policy” and not an individual one, it does not fit the criteria of the notification. The benefits (lower rates, extra coverage) derived from being a group further distinguish it from the individual policies targeted by the exemption.
Ruling: The claim for exemption was rejected. The exemption is intended solely for individual health insurance policies.
Key Takeaways
Strict Interpretation of Exemption: Tax exemption notifications are construed strictly. If the language excludes “groups,” no amount of benevolent intent (welfare of retirees) can override the statutory text.
Group vs. Individual:
Collective Bargaining: Policies born out of collective bargaining (unions, associations) are typically treated as commercial group contracts, which often attract standard GST rates, unlike certain exempted individual schemes.
Impact: Retired employees part of such group schemes must pay the applicable GST on their premiums, despite the social welfare aspect of the arrangement.
HIGH COURT OF KERALA
E.P. Gopakumar
v.
Union of India*
ZIYAD RAHMAN A.A., J.
WP(C) NO. 38316, 36636, 37812, 38178, 38436, 38552, 38670 and 38757 OF 2025
JANUARY 8, 2026
V.K. Prasad, Smt. Josna C.F., Smt. Rintu Paul, V.M. Krishnakumar, Dr. Silpa Aziz, Advs. and Renjith Thampan, Sr. Adv. for the Petitioner. Praveen K.S., Renjish S. Menon, Smt. Girija L., Smt. Sanjana R. Nair, Satheesh T.P., CGCs, P.R. Sreejith, P.T. Dinesh, Sr. Standing Counsels, V. Girishkumar, SC, P. Fazil, Jithin Paul Varghese, Fadil Fazil, Smt. Aswathy Jayachandran, George A. Cherian, Smt. M. Santhy, Smt. Latha Anand, Smt. Anna Rose Nambadan, S.Vishnu (Arikkattil), Sunil Shanker, Smt. Vidya Gangadharan, Thomas Glaison, C. Ajith Kumar, Smt. Varsha S.S., Smt. Rosanna C. Wilson, Dr. Pauly Mathew Muricken, H. Ramanan, Smt. Akshaya Thomas, Asvino Sheej S., Alan Philip Alex, Smt. Arathi Prabhakaran, P.R.Sreejith, Saju Thaliath, C. Prabitha, Advs. and George Cherian, Sr. Adv. for the Respondent.
JUDGMENT
[WP(C) Nos.38316/2025, 36636/2025, 37812/2025, 38178/2025, 38436/2025, 38552/2025, 38670/2025, 38757/2025].
1. In all these cases, the petitioners are retired employees of various banks and the members of group health insurance policies issued by the National Insurance Company Limited. The common issue involved in these writ petitions is regarding the question as to whether the petitioners are entitled to the exemption from payment of GST for the premium paid by them towards group insurance policy in the light of the notification published by the Government as per G.S.R.666(E) dated 17.9.2025 based on the recommendations of the GST Council, by which, certain exemptions were contemplated for health insurance policies, from payment of GST. In all these cases, the insurer insisted for payment of GST and the respective banks as well as the Indian Bank Association also required the petitioners to make the payment of premium along with GST. It was in these circumstances, these writ petitions were filed. In W.P.(C)No.38436/2025, the reliefs sought are as follows:
“i) Issue a writ of mandamus or any other appropriate writ, order or direction declaring that the levy of GST at 18% on the premium collected towards renewal of health insurance policies of the retired employees/family pensioners of Punjab National Bank, including the Petitioners, with effect from 01.11.2025 is illegal, arbitrary, and ultra vires Exhibit P1 decision of the GST Council and Exhibit P2 Notification issued by the 1st Respondent.
(ii) Declare that the health insurance policy offered to retired employees/family pensioners of Punjab National Bank is covered by the exemption granted under Exhibit P2 Notification, and that no GST is leviable on such policies.
(iii) Issue a writ of mandamus or any other appropriate writ, order, or direction commanding the Respondents 1 to 6 to ensure that the renewal premium for the health insurance policy of retirees/family pensioners of Punjab National Bank for the policy year 2025-26 is collected and remitted without levy of GST.
iv. Issue a writ of mandamus or any other appropriate writ, order or direction directing the Respondents to forthwith refund or adjust the GST component already collected from the Petitioners and other similarly placed retirees towards the premium for the policy year 2025- 26.
v. Issue a writ of certiorari or any other appropriate writ, order or direction quashing Exhibit P4 Circular dated 18.09.2025 issued by the 4th Respondent, to the extent it provides for levy of GST @18% over and above the premium.
vi. To issue any other writ, direction or order which this Hon’ble Court may deem fit and necessary in the interests of justice.”
Similar reliefs were sought in the other writ petitions as well.
2. Counter affidavits were submitted by the Union of India in all the cases. The National Insurance Company Limited also submitted a separate counter affidavit. In those counter affidavits, the contentions and claims raised by the petitioners were stoutly opposed by placing reliance upon various statutory provisions and the regulations/circulars issued by the IRDAI (Insurance Regulatory and Development Authority of India).
3. I have heard Sri.Renjith Thampan, the learned Senior Counsel, Sri. R.Lekshmi Narayanan, the learned Senior Counsel and Sri.V.K.Prasad, the learned counsel appearing for the petitioners, Sri. George A. Cheriyan (Thiruvalla), learned Senior counsel appearing for the Insurance Company, Sri. P.T. Dinesh, Sri. P.R. Sreejith and Sri.V.Gireesh Kumar, the learned Senior Standing Counsel for the CGST.
4. The main objections raised by the respondents against the claim made by the petitioners seeking exemption is that, going by the recommendations of the GST Council in its 56th meeting, based on which the exemption was granted, as regards the health insurance policies, the exemption of GST was contemplated only in respect of individual health insurance policies, including family floater policies and policies for senior citizens, and the same was never intended to be extended to the group insurance policies. The respondents highlighted this aspect, by specifically bringing the attention of this Court to the relevant clauses in the notification, which is produced as Ext.P2 in WP(C)No.38463/2025.
5. The specific contention raised by the learned Senior Counsel appearing for the petitioners is that, even though the reading of Ext.P2 notification would convey a primary impression that it is not applicable to the group insurance policies, considering the definition of ‘group’ as contained therein, a different conclusion is possible. According to the petitioners, going by the said definition, the group referred to, in the said clause, is in respect of persons, who joined together with a commonality of purpose or for engaging in a common economic activity, other than availing insurance. According to the petitioners, they have joined together, only for the purpose of availing the insurance and apart from that, there was no commonality of purpose or they have not engaged in common economic activity. Therefore, the specific case of the petitioners is that, the petitioners, even though availed the policy as a group, would not fall under the ‘group’ as referred to in Ext.P2 notification and hence, the exclusions in Ext.P2 cannot be made applicable to the petitioners. Thus, the petitioners are entitled to the benefits of exemption as per Ext.P2 notification, since they are not falling under the exemptions of the said notification.
6. The reliance was placed on the decisions rendered by the Hon’ble Supreme Court in Achal Industries v. State of Karnataka GST 196 (SC)/(2019) 7 SCC 703], ITO v. T.S. Devinatha Nadar [1968] 68 ITR 252 (SC)/AIR 1968 SC 623], Commissioner of Customs (Preventive), Mumbai v. M. Ambalal and Co. (2011) 2 SCC 74, C.E.S.C. Ltd. v. Subhas Chandra Bose (1992) 1 SCC 441 and the decision rendered by the Division Bench of Gujarat High Court in Educational l Initiatives (P.) Ltd. v. UOI GSTL 45 (Gujarat)/R/Special civil application No.16476/2021.
7. On the other hand, the learned Standing Counsel as well as the learned Senior Counsel appearing for the insurance companies stoutly oppose the reliefs sought by the petitioners, by pointing out that, the respondents are not falling under the exemptions provided as per Ext.P2. The learned Standing Counsel also brought to the attention of this Court, the Insurance Regulatory And Development Authority of India (Health Insurance) Regulations, 2016, wherein, it is contemplated that no group health insurance policy shall be issued by any insurer, wherein, group is formed with the main purpose of availing itself of insurance. There shall be a clearly evident relationship as specified by the Authority from time to time between the members of the group and the group policy holder. Thus, it was contended that these writ petitions are to be dismissed.
8. I have carefully gone through the records and examined the contentions raised by both sides. Before moving into the consideration of issues arising in these case, it is necessary to examine the relevant clauses in the notifications issued by the Government as well as the other authorities. As mentioned above, G.S.R.666(E) dated 17.9.2025 is the notification issued by the Central Government based on the recommendations of the GST Council. Clause 36D of the same reads as follows:
“36D Heading 9971 Service of health insurance Nil Nil business provided by an insurer to the insured, where the insured is not a group [Please refer to clause (zfb) in para2]
Explanation: For the removal of doubts, it is hereby clarified that:
a. This exemption shall apply to a contract of insurance where the insured is an individual, or an individual and family of the said individual.
b. For the purposes of (a) above, family shall include all individuals insured as family in the contract of insurance.”
The said clause deals with the exemptions relating to the services of the health insurance provided by an insurer to the insured where the insured is not a group. The aforesaid notification was issued in exercise of the powers conferred by sub-sections(3) and (4) of section 9, sub-section (1) of section 11, sub section (5) of section 15 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017). As per the said notification, certain amendments were brought in the notification number 12/2017 dated 28.06.2017. As per clause(b)(ii) of the notification dated 17.09.2025, after clause (zfa) of the original notification sought to be amended, clause (zfb) was inserted and the said clause reads as follows:
“(zfb) For the purposes of entries at serial numbers 36C and 36D in the table above, ‘group’ means group of persons who join together with a commonality of purpose or for engaging in a common economic activity, other than availing insurance, and includes:
a. Employer- employee groups, where an employer-employee relationship exists between the master/group policyholder and the members of the group in accordance with the applicable laws;
b. Non employer-employee groups, where a clearly evident relationship exists between the master/group policyholder and the members of the group, for services/activities other than insurance.”
9. The specific contention of the petitioners is that, since the petitioners are retired employees of various banks, they have not joined together with a commonality of purpose other than availing insurance and hence they are not coming within the definition of “group” as defined above. However, one important aspect to be noted while considering the aforesaid contention is that, in Ext.P1, which is the recommendations of the 56th meeting of the GST Council, the exemption of GST is provided on all individual health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof, to make insurance affordable for the common man and increase the insurance coverage in the country. It is to be noted that, the issuance of Ext.P2 is by acting upon the recommendations of the GST Council, which going by Ext.P1, is intended to be made applicable to the individual health insurance policies alone. The said fact is made clear in clause 36D as well, where, it is specifically mentioned that, the exemption is provided to the services of health insurance business provided by the insurer to the insured, where, the insured is not a group. Apart from the above, the said clause contained an “Explanation” which states that, “for the removal of doubts, it is hereby clarified that this exemption shall apply to a contract of insurance where the insured is an individual, or an individual and family of the said individual”. Thus the fact that, it is applicable to the individual policies alone, is reiterated in the explanation contemplated therein.
10. It is the specific case of the respondents that the policies which are the subject matter in these writ petitions, were issued as group medical insurance policies, based on the negotiation made by the Indian Banks’ Association with the General Insurance Companies. Exhibit P3 issued by the Indian Banks’ Association indicates the procedure followed by the said Association, while causing the policy to be issued by the insurer. It is discernible from Ext.P3 that, the Group Medical Insurance scheme in-lieu of Reimbursement of Hospitalisation scheme was introduced as per 10th Bipartite Settlement/7th Joint Note dated 25.05.2015. The said scheme was extended to retired employees and their spouses, with a condition that, the premium will be paid by them. The existing policy (2024-25) is covering 5,75,166 serving employees and 1,51,668 retired employees. It is also the case of the respondents that, as part of the negotiation, the Indian Banks’ Association invited bids from the Insurance Companies and in the said process, M/s. National Insurance Company was selected. The rates for premium were also fixed through the said process. The case of the respondents is that, the policies issued in these cases are having all the characteristics of a group insurance policy, in view of the fact that, the same covers a large number of persons who are retired employees of the banks, who by themselves form a class, and the benefits of the same were obtained by way of collective bargaining, thereby getting reduced rates. They are also getting rid of certain restrictions that are applicable to the individual policies that provides for medical check up, exclusion clause regarding pre-existing disease and the waiting period for certain coverages, etc. Yet another point highlighted by the respondents is that, as per Regulation 3(5) of Chapter 1 of IRDAI (Insurance Products)Regulations, 2024, “group” consists of persons who join together with a commonality of purpose or engaging in a common economic activity and includes the following:-
“a. Employer- employee group is a group where an employeremployee relationship exists between the master policyholder and the member in accordance with the applicable laws.
b. Non-Employer- employee group is a group other than employer- employee where a clearly evident relationship between the member and the group policyholder exists for services/activities other than insurance.”
11. The crucial aspect to be noticed is that, admittedly, the policy is issued by a general insurance company, which can only issue a policy, as permitted by the IRDAI, the sole regulatory body in this field. As rightly pointed out by the learned Standing Counsel for the respondents, clause 7 of the IRDAI (Health Insurance) Regulations, 2016, specifically prohibits forming of a group with the main purpose of availing itself of an insurance. Thus, the fact that, the policy was issued to a large number of persons extending to more than 1.5 lakhs persons by a general insurance company bound by the regulation issued by the IRDAI, itself indicates that the said policy was issued in terms of the relevant regulations. As mentioned above, the regulation contains a clause prohibiting forming a group, exclusively for the purpose of availing insurance coverage and there must be some relationship between the members of the group and the group policyholder. Therefore, the issuance of policy by following the regulations of IRDAI itself would indicate that the said policy was issued to a group, where, there is an evident relationship between the members of the group and the policyholder.
12. Apart from the above, I find merits in the contentions raised by the respondents that the policies which are relevant in these cases are obtained by the Indian Banks’ Association through collective bargaining. The benefits of the said collective bargaining are clearly explained in the counter affidavit of the 2nd respondent in WP(C)No.38436/2025. In paragraph 20 thereof reads as follows:
“a. Cost Savings Passed to Members: Insurers save on distribution, underwriting, and policy administration costs in group policies. These savings are typically passed on to the insured members in the form of lower premiums.
b. Lower Premiums: Premiums under group health insurance are generally lower than those for individual policies, owing to risk pooling across a larger group and the inherent homogeneity of group members.
c. Minimal or No Medical Underwriting: Coverage is often extended without detailed medical checks, particularly in employer employee groups.
d. Coverage for Pre-existing Conditions: Many group policies cover pre-existing diseases from day one or after a relatively short waiting period, unlike retail policies which may have longer exclusion periods.
e. Family Coverage: Many Groups allow members to extend coverage to spouses, children, and, in some cases, parents at competitive rates.
f. Voluntary Top-up Options: Several group plans offer optional top-up cover at preferential rates, allowing members to enhance their base coverage.
g. Streamlined Administration: Insurers often provide dedicated account managers, digital portals, or HR dashboards to facilitate smooth policy administration for the employer or group administrator.”
Evidently, in this case, the petitioners have availed advantages as highlighted above, which show a clear distinction between the individual policy and group insurance policy. It is also to be noted in this regard that, as observed above, Ext.P1 which is the recommendations of the GST Council, provides exemption only to individual health insurance policies and the said fact is further reinforced by the wordings used in clause 36D of notification dated 17.09.2025, where, it is specifically mentioned that the exemption is for individual policies and not for a group. It is further clarified in the Explanation in the said notification that, the said exemption shall apply to a contract of insurance where the insured is an individual or an individual and family of the said individual. All these aspects clearly indicate that the exemption was provided only to the individual policy holders and not the members of a group insurance policies.
13. Of course, the learned Senior Counsel appearing for the petitioners pointed out that, the definition of ‘group’, as mentioned in Ext.P2, even though similar to the definition of ‘group’ as contained in the IRDAI regulation, there is a subtle difference between the two. It was pointed out that, in the definition of ‘group’ as contained in IRDAI regulation, the group consists of persons who joined together with a commonality of purpose or engaging in a common activity, whereas in Ext.P2 notification, the ‘group’ is a group of persons who joined together with a commonality of purpose or for engaging in a common activity “other than availing insurance”. Thus, according to the petitioners the specific inclusion of the words “other than availing insurance” is very important and by virtue of inclusion of the said clause in the definition of ‘group’ in Ext.P2, the groups, which are formed together only for the purpose of availing the benefit of insurance should be exempted. While considering the said contention, it is to be noted that, going by the Regulations of the IRDAI, there is no policy contemplated for a group which is formed for the sole purpose of availing the insurance and there must be a relationship between the members of the group and the policy holder. As mentioned above, the policy in this case was issued in terms of the IRDAI Regulations and therefore that by itself is a certification of the fact that it was a policy issued to a group, as defined under the provisions of the IRDAI Regulations and therefore, the fact that, in the definition of ‘group’ included in Ext.P2 contains a clause that “other than availing insurance”, would not make a difference.
14. The documents produced before this Court and the sequence of events that led to the issuance of the policy also clearly establishes the relationship between the members of the policy and the policyholder. As mentioned above, Ext.P3 would indicate that the scheme of insurance policy itself was introduced as part of 10th Bipartite Settlement/7th Joint Note dated 25.5.2015 and later the benefits of the same were extended to the retired employees. A detailed procedure is followed by the Indian Banks’ Association, which floated a tender to find out an insurer who can provide a better package at a lesser price. Thereafter, a contract was entered into between the said insurer and the Indian Banks Association. Rates of premium were also fixed after such negotiations/proceedings between the Indian Banks Association and the Insurance Company. Thus, the Indian Banks Association, for all practical purposes, was acting as an intermediary and after a collective bargaining, better rates of premium were fixed with additional benefits, which were not otherwise available for individual policyholders. Apart from the above, this particular policy is issued for the welfare of the retirees from various banks who by themselves formed into a class, on account of their prior employment with the banks. Thus, there is a commonality of purpose behind the join together of the members of the Association and the Indian Banks Association, which is bound to ensure the welfare of the retired employees of the banks, while extending the benefits of group insurance policy. Therefore, under no circumstances, the contentions raised by the petitioners can be accepted.
15. When it comes to the decisions relied on by the petitioners, it is to be noted that, the decisions of the Hon’ble Supreme Court in Achal Industries(M/s.) and T.S.Devinatha Nadar (supra) were relied on to show that, when there is a doubt as to the meaning of a provision in fiscal statute, it must be construed in favour of the tax payers. However, the question to be considered in these cases, is not in relation to the interpretation of the provision in the taxation statute which deals with the imposition of tax, but on the other hand, the interpretation is that of the relevant clause in a statutory notification intended for an exemption contemplated under the Act from the obligation to pay the tax. When it comes to the exemption from tax, the settled position of law is that, when there is doubt as to the interpretation, the benefit of the same should go to the State. Of course, the learned Senior Counsel Sri. R.Lekshmi Narayanan, appearing for Indian Banks Association, relied on the observations made in Commissioner of Customs (Preventive) and Subhas Chandra Bose (supra) where it was observed that, the rule regarding exemptions is that, the exemptions should generally be strictly interpreted, but beneficial exemptions having their purpose as encouragement or promotion of certain activities, should be liberally interpreted. However, the question of strict interpretation does not arise in this case, as going by the stipulations contained in Ext.P2 particularly clause 36D thereof, there is no ambiguity, particularly when it is taken into consideration in the light of the recommendations of the GST Council, as reflected in Ext.P1. The intention is very specific, which is confined to the individual policies only, and not to the group insurance policies.
16. Of course, there could be a doubt with regard to the definition of ‘group’ as contained in Ext.P2, in respect of the groups which are formed solely for the purpose of availing the insurance policy. However, since the IRDAI Regulations does not contemplate for a policy in respect of a group which is formed solely for the purpose of insurance coverage, the policies which are the subject matter in these writ petitions, cannot be construed as policies, that are issued for a group, which are solely constituted for the purpose of insurance coverage. Therefore, I find no merits in the contentions raised by the petitioners. As mentioned above, the exemption provided as per the notification No.16/2025- Central Tax (Rate); G.S.R. 666(E) dated 17.9.2025, is intended to cover the individual policies alone, and not for the group insurance policies issued based on the understanding reached between the Indian Banks Association and the Insurance Company followed by collective bargaining.
In such circumstances, I do not find any merits in these writ petitions and accordingly, these writ petitions are dismissed.