The Telangana Authority of Advance Ruling (AAR) in the case of M/s Hyderabad Metropolitan Water Supply and Sewerage Board vide Order No. TSAAR 28/2022 dated 03.06.2022, has observed that GST is payable on medical health insurance premiums for employees.

The applicant, M/s. Hyderabad Metropolitan Water Supply and Sewerage Board, has paid medical insurance premiums to provide health insurance to the employees, pensioners and their family members. The vehicle insurance policy was taken to provide insurance to the vehicles owned by the Board.

The applicant has sought an advance ruling on the issue of whether medical insurance premiums taken to provide health insurance to the employees, pensioners and their family members are eligible for GST exemption.

Pure services provided “in relation to any function” entrusted to a municipality under Article 243W of the Constitution of India are eligible for exemption from GST. Clearly, the exemption should be directly related to the functions enumerated under Article 243W of the Constitution of India, i.e., those functions listed under the 12th schedule.

The AAR noted that the applicant is procuring medical insurance services for its employees and their family members. Thus, there is no direct relation between the insurance services procured by the applicant and the functions discharged by them under Article 243W read with Schedule 12 to the Constitution of India. Therefore, these services do not qualify for exemption under Notification No. 12/2017.

The AAR ruled that vehicle insurance policies procured by the applicant for the vehicles owned by the board qualify for exemption if they are directly used to provide services under Schedule XII of the Constitution. However, if they are used for transportation of employees, board members, or other people, they will not have a direct relationship to the functions discharged under Article 243W. Therefore, it will not qualify for exemption under Notification No. 12/2017.