Circular No. 186/18/2022-GST [C10-6B7]

Representations have been received from the field formations seeking clarification on certain issues with respect to – i. taxability of No Claim Bonus offered by Insurance companies; ii. applicability of e-invoicing w.r.t an entity.

2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues as under:

S. No. Issue Clarification

Taxability of No Claim Bonus offered by Insurance companies

1. Whether the deduction on As per practice prevailing in the insurance account of No Claim Bonus sector, the insurance companies deduct No allowed by the insurance Claim Bonus from the gross insurance premium company from the insurance amount, when no claim is made by the insured premium payable by the person during the previous insurance period(s). insured, can be considered as The customer/ insured procures insurance policy consideration for the supply to indemnify himself from any loss/ injury as per provided by the insured to the the terms of the policy, and is not under any insurance company, for contractual obligation not to claim insurance agreeing to the obligation to

refrain from the act of lodging claim during any period covered under the insurance claim during the policy, in lieu of No Claim Bonus. previous year(s)? It is, therefore, clarified that there is no supply provided by the insured to the insurance company in form of agreeing to the obligation to refrain from the act of lodging insurance claim during the previous year(s) and No Claim Bonus cannot be considered as a consideration for any supply provided by the insured to the insurance company.

2. Whether No Claim Bonus As per clause (a) of sub-section (3) of section 15 provided by the insurance of the CGST Act, value of supply shall not company to the insured can be include any discount which is given before or at considered as an admissible the time of supply if such discount has been duly discount for the purpose of recorded in the invoice issued in respect of such determination of value of supply. supply of insurance service provided by the insurance The insurance companies make the disclosure of company to the insured? the fact of availability of discount in form of No Claim Bonus, subject to certain conditions, to the insured in the insurance policy document itself and also provide the details of the no claim Bonus in the invoices also. The pre-disclosure of NCB amount in the policy documents and specific mention of the discount in form of No Claim Bonus in the invoice is in consonance with the conditions laid down for deduction of discount from the value of supply under clause

(a) of sub-section (3) of section 15 of the CGST Act. It is, therefore, clarified that No Claim Bonus (NCB) is a permissible deduction under clause

(a) of sub-section (3) of section 15 of the CGST Act for the purpose of calculation of value of supply of the insurance services provided by the insurance company to the insured. Accordingly, where the deduction on account of No claim bonus is provided in the invoice issued by the insurer to the insured, GST shall be leviable on actual insurance premium amount, payable by the policy holders to the insurer, after deduction of No Claim Bonus mentioned on the invoice.

Clarification on applicability of e-invoicing w.r.t an entity

3. Whether the exemption from In terms of Notification No. 13/2020-Central mandatory generation of e- Tax dated 21st March, 2020, as amended, certain invoices in terms of entities/sectors have been exempted from Notification No. 13/2020- mandatory generation of e-invoices as per sub- Central Tax, dated 21st March, rule (4) of rule 48 of Central Goods and Services 2020, as amended, is available Tax Rules, 2017. It is hereby clarified that the for the entity as whole, or said exemption from generation of e-invoices is whether the same is available for the entity as a whole and is not restricted by only in respect of certain the nature of supply being made by the said supplies made by the said entity. entity?

Illustration: A Banking Company providing banking services, may also be involved in making supply of some goods, including bullion. The said banking company is exempted from mandatory issuance of e-invoice in terms of Notification No. 13/2020-Central Tax, dated 21st March, 2020, as amended, for all supplies of goods and services and thus, will not be required to issue e-invoice with respect to any supply made by it.

3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

4. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.