Order Date: 03 June 2022

Facts:

• The Applicant, M/s. Hyderabad Metropolitan Water Supply and Sewerage Board, have paid medical insurance premium, taken to provide health Insurance to the employees, pensioners and their family members and Vehicle insurance Policy taken to provide Insurance to the vehicles owned by the Board.
• The applicant refers to Entry No. 3 of the Notification Number 12/2017 - Central Tax (Rate), dt 28th June, 2017, wherein it is provided that Pure services provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution, the rate of GST is NIL. 
• In the opinion of Applicant, being a governmental authority, the above entry No.3 is applicable to them and GST is exempt on the aforesaid activities.

Issues: 

• Whether government authority is liable to pay GST on medical insurance premium taken to provide health Insurance to the employees, pensioners and their family members and Vehicle insurance Policy taken to provide Insurance to the vehicles owned by the Board.

Order:

• The Authorities observed that As per Entry No. 3 of the Notification Number 12/2017, the exemption should be directly related to the functions enumerated under Article 243W of the Constitution of India i.e., those functions listed under 12th schedule.
• The authorities also referred to the case of Doypack Systems Pvt. Ltd. vs. Union of India (UOI) and Ors. (12.02.1988 - SC) AIR 1988 SC 782 and also to Madhav Rao Jivaji Rao Scindia Vs Union of India AIR 1971 SC 530 which clearly specifies the meaning of term ‘’in relation to’’ means to bring into relation or establish a relation. It was further clarified that there should be a direct and immediate link with a covenant and that there cannot be any independent existence outside such covenant.
• Hence it was held that, 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.
• Also held 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/other persons they will not have direct relationship to functions discharged under Article 243W and therefore will not qualify for exemption.