Mr. Bose took a health insurance policy for the coverage amount of 5,00,000 upon making payment of premium of 10,000 annually (exclusive of GST)…

CA Intermediate · Taxation · RTP · January 2026
Mr. Bose took a health insurance policy for the coverage amount of 5,00,000 upon making payment of premium of 10,000 annually (exclusive of GST) from Swasthya Bima Insurance Co. on 01.10.2024. Mr Bose had no claim during 2024-25. On 01.10.2025 Swasthya Bima Insurance Co. offered a discount of 5% on the renewal premium amount to Mr Bose for having claim free year 2024-25 because the company has a policy of offering a discount of 5% on the renewal premium amount for every claim free year in form of no claim bonus. The Swasthya Bima Insurance Co. make the disclosure of the fact of availability of discount in form of NCB, subject to certain conditions, to Mr. Bose in the insurance policy document itself. Also, there is specific mention of the discount in form of no claim bonus in the invoice issued by Swasthya Bima Insurance Co. to Mr. Bose. As per Mr Bose's accountant, he has to pay GST on whole renewal premium amount without any deduction as no claim bonus is for agreeing to the obligation to refrain from the act of lodging insurance claim during 2024-25. Is the contention of the Accountant, correct? Reason for the same should form part of your answer.

Suggested Answer and Working Notes:

The value of supply does not include any discount which is given before or at the time of supply if such discount has been duly recorded in the invoice issued in respect of such supply. It is, therefore, clarified that no claim bonus (NCB) is a permissible deduction for the purpose of calculation of value of supply of the insurance services provided by the insurance company to the insured subject to the pre-disclosure of NCB amount in the policy documents and specific mention of the discount in form of NCB in the invoice. No, the contention of the Accountant is not correct in view of the above-mentioned provisions. Since the deduction on account of NCB is provided in the invoice issued by the insurer to the insured, GST shall be leviable on actual insurance premium amount, payable by Mr. Bose to the Swasthya Bima Insurance Co., after deduction of NCB mentioned on the invoice.

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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