The Kerala High Court, in S. Ajith Kumar v. Union of India, WP(C) No. 38316/2025, examined the scope of GST exemption on health insurance premiums in the context of group health insurance policies availed by retired bank employees. The petitioners challenged the levy of GST @18% on premiums paid under group health insurance schemes negotiated through banks/IBA, contending that the exemption introduced by Notification No. 16/2025 should apply to such policies as well. The Court was thus called upon to determine whether the GST exemption on health insurance is confined to individual policies or also extends to group insurance arrangements.
Facts
- Retired bank employees (members of group health insurance policies negotiated by Indian Banks’ Association and issued by general insurers) challenged the levy of 18% GST on their health insurance premiums.
- They sought exemption on the basis of Notification No. 16/2025-Central Tax (Rate); G.S.R. 666(E) dated 17.09.2025, which granted a GST exemption on health insurance premiums.
Key Legal Issue
👉 Whether the GST exemption for health insurance under Notification No. 16/2025 applies to group health insurance policies or is limited to individual (and family) policies.
Kerala HC – Decision (8 Jan 2026)
✅ Held: The GST exemption does not extend to group health insurance policies.
👎 The writ petitions were dismissed and the levy of 18% GST was upheld.
Reasoning
- Notification Interpretation
- The exemption entry (clause 36D) in Notification No. 16/2025 specifically applies where the insured is not a group — meaning individual or individual + family only.
- Definition of ‘Group’
- While petitioners argued that the retirement group joined solely to avail insurance, the Court held that:
- The policies were issued in line with IRDAI (Health Insurance) Regulations, which do not permit groups formed only for insurance; and
- The policy structure, collective bargaining, and prior employment ties qualify the insured persons as a group under the notification.
- While petitioners argued that the retirement group joined solely to avail insurance, the Court held that:
- Intent of GST Council & Notification
- The GST Council’s exemption was clearly intended only for individual health insurance products (including family floater and senior citizen individual policies), not for collectively negotiated group policies.
Practical Takeaways
✔ GST Exemption Applies To:
• Individual health insurance policies (including family floaters and policies purchased directly by individuals) under Notification No. 16/2025.
❌ GST Exemption Does Not Apply To:
• Group health insurance policies negotiated collectively through associations/employers (including retired bank employees’ group covers).
Outcome
-
All petitions were dismissed, and the 18% GST levy was upheld on group health insurance premium collections.