1. Quick decision framework: identify which insurance flow you are reviewing
Co-insurance premium sharing and reinsurance commission are not ordinary third-party service invoices. Circular No. 244/01/2025-GST explains the treatment of specified flows and the conditions that must be satisfied. Start by separating the policyholder premium, the lead insurer’s apportionment to co-insurers, the reinsurance premium paid to a reinsurer and any ceding commission retained by the insurer.
Several insurers jointly provide cover to one insured. The lead insurer collects the premium and apportions shares to participating co-insurers.
An insurer transfers part of its risk to a reinsurer and pays reinsurance premium under a separate contract.
A commission or allowance may be deducted from the reinsurance premium. Do not confuse the net cash remittance with the gross premium base.
Check the statutory conditions, contract, tax invoice/statement, premium calculation and tax payment evidence before applying Schedule III treatment.
2. Legal framework and effective date
The Finance (No. 2) Act, 2024 amended Schedule III to the CGST Act to include specified co-insurance premium apportionment and specified insurer-to-reinsurer services relating to ceding/reinsurance commission. The changes took effect from 1 November 2024 through Notification No. 17/2024–Central Tax dated 27 September 2024. Circular No. 244/01/2025-GST dated 28 January 2025 explains the treatment and the historical regularisation.
| Authority / item | Practical relevance |
|---|---|
| Schedule III, CGST Act | Specified activities are treated neither as supply of goods nor as supply of services, subject to the stated conditions. |
| Notification No. 17/2024–Central Tax | Brings the relevant Schedule III amendment into effect from 1 November 2024. |
| Circular No. 244/01/2025-GST | Clarifies conditions for co-insurance apportionment and ceding/reinsurance commission, and historical treatment. |
| Sections 7, 9 and 15 | Remain relevant to determine supply, levy and valuation for other independent transactions. |
Always confirm the corresponding State/UT enactment and any applicable later amendment or clarification for the tax period under review.
3. Co-insurance: lead insurer and co-insurer
In a co-insurance arrangement, two or more insurers jointly cover an insured risk. A lead insurer may issue or administer the policy, collect the full premium from the policyholder and apportion the premium among co-insurers according to agreed participation percentages.
How the specified treatment works
- The policyholder pays the total premium for the jointly supplied insurance cover.
- The lead insurer calculates each co-insurer’s agreed share.
- The lead insurer pays GST on the entire premium paid by the insured, subject to the circular’s conditions.
- The apportionment of the co-insurance premium by the lead insurer to the co-insurer is covered by the Schedule III entry when the required condition is met.
The treatment relies on the lead insurer paying the applicable CGST, SGST/UTGST or IGST on the entire premium received from the insured. Retain evidence that ties the gross premium, tax paid, participation shares and remittances together.
Example — 60:40 participation
Gross policy premium is ₹10,00,000. Insurer A is the lead insurer with a 60% share and Insurer B has a 40% share. The lead insurer’s accounting may show ₹6,00,000 retained and ₹4,00,000 apportioned to Insurer B. For the specified Schedule III treatment, verify that the lead insurer pays GST on the full ₹10,00,000 premium—not merely on the retained ₹6,00,000 share.
4. Conditions for Schedule III treatment
The statutory treatment is conditional. A robust review should establish the following points rather than relying only on the heading “co-insurance” in an agreement.
| Control point | Evidence to inspect | Why it matters |
|---|---|---|
| Joint insurance arrangement | Policy wording, co-insurance schedule, participation agreement | Establishes that the transaction is premium apportionment for jointly supplied insurance. |
| Gross premium received | Policy register, premium receipt, bank statement | Confirms the base on which lead insurer’s GST obligation is tested. |
| Tax payment on entire premium | Tax invoice/statement, return working, tax ledger and payment evidence | Express condition for the specified Schedule III entry. |
| Share remittance | Co-insurer statement, settlement advice, bank entry | Links the apportionment to the relevant policy and premium. |
| Reconciliation | Policy-wise premium and tax reconciliation | Identifies missing policies, differences and duplicate postings. |
If the condition is not demonstrably met, do not assume the apportionment automatically receives the Schedule III treatment. Escalate the facts for a transaction-specific legal review and examine the applicable law for the period.
5. Reinsurance and ceding commission
Reinsurance is a contract under which an insurer (cedant) transfers part of its insured risk to a reinsurer. The insurer pays a reinsurance premium. The reinsurer may allow a ceding or reinsurance commission to the insurer, which is sometimes settled by deduction from the gross reinsurance premium.
The specified Schedule III entry covers services by an insurer to a reinsurer for which ceding commission or reinsurance commission is deducted from reinsurance premium, subject to the condition that the reinsurer pays applicable GST on the gross reinsurance premium payable by the insurer, inclusive of the ceding/reinsurance commission.
Key distinction
| Item | Meaning | GST control |
|---|---|---|
| Gross reinsurance premium | Premium payable before deducting ceding commission | Relevant gross base for the stated condition. |
| Ceding commission | Commission deducted/allowed under the reinsurance arrangement | Do not analyse only the net remittance; check the Schedule III condition. |
| Net cash remitted | Gross premium less commission or other contractual adjustments | Cash movement alone does not establish the tax base. |
| Separate administration or brokerage fee | Independent service consideration, if any | Analyse separately; the specific entry does not automatically cover every fee between parties. |
6. Gross premium versus net settlement: numerical illustration
Assume an insurer owes gross reinsurance premium of ₹1,00,00,000. A ceding commission of ₹15,00,000 is deducted, and the insurer remits ₹85,00,000 in cash to the reinsurer.
| Particulars | Amount | Practical interpretation |
|---|---|---|
| Gross reinsurance premium | ₹1,00,00,000 | Start here when testing the circular’s gross-premium condition. |
| Ceding commission deducted | ₹15,00,000 | Record and reconcile separately; do not assume it reduces the relevant gross base. |
| Net cash remittance | ₹85,00,000 | Settlement amount only; not automatically the statutory GST base for this condition. |
The insurer/reinsurer teams must verify that the reinsurer has paid GST on the gross premium inclusive of the commission as required. The illustration explains the calculation logic, not a prescribed invoice format or tax rate for every reinsurance transaction.
7. Historical period: 1 July 2017 to 31 October 2024
Circular No. 244/01/2025-GST states that GST payment on the specified activities for the period 1 July 2017 to 31 October 2024 was regularised on an “as is where is” basis. This is a specific historical regularisation; it should not be rewritten as a general refund entitlement or a blanket permission to reverse all tax previously paid.
Identify whether GST was charged or paid on co-insurance apportionment or ceding commission during the covered period, and retain the facts and accounting trail.
Apply the Schedule III entries only after verifying the relevant conditions, including payment of GST on the full premium bases described in the circular.
Historical review file should contain
- Period-wise policy/reinsurance contract listing.
- Tax invoices, debit/credit notes and settlement statements.
- Gross premium, commission and net remittance reconciliation.
- GST return and tax payment evidence.
- Written note explaining how the circular’s “as is where is” regularisation has been applied.
Before making a refund claim, credit note, adjustment or voluntary payment, check the applicable statutory limitation, procedural requirements and the precise facts. The circular’s regularisation wording alone should not be treated as proof that a particular refund or adjustment is available.
8. Worked examples with solutions
Example 1 — Lead insurer pays tax on full premium
Facts: Policyholder pays ₹50 lakh; lead insurer retains ₹30 lakh and apportions ₹20 lakh to a co-insurer. Lead insurer’s records establish GST payment on the full ₹50 lakh.
Solution: Subject to the arrangement meeting the legal description and other facts, the apportionment to the co-insurer falls within the specified Schedule III treatment. Keep the policy, participation ratio and full-premium tax proof together.
Example 2 — Lead insurer pays tax only on retained share
Facts: Premium is ₹50 lakh, but tax working covers only ₹30 lakh retained by the lead insurer.
Solution: The express full-premium condition is not demonstrated. Do not apply the Schedule III treatment without resolving the shortfall and obtaining a period-specific tax review.
Example 3 — Ceding commission deducted from gross reinsurance premium
Facts: Gross premium ₹2 crore; commission ₹20 lakh; net remittance ₹1.8 crore.
Solution: Test whether the reinsurer has paid GST on the ₹2 crore gross premium inclusive of the commission, as required by the specified entry. Do not test only against the ₹1.8 crore bank remittance.
Example 4 — Separate brokerage fee
Facts: An intermediary separately invoices brokerage or placement services in addition to the reinsurance settlement.
Solution: The specific Schedule III entry for ceding/reinsurance commission does not automatically settle the treatment of an independent intermediary service. Analyse the separate contract, recipient, consideration and applicable provisions.
Example 5 — Historical GST charged before November 2024
Facts: A company charged GST on a covered apportionment in FY 2022–23.
Solution: Review Circular 244’s historical “as is where is” regularisation. Do not automatically issue a credit note or claim a refund; check the transaction record and applicable procedural/limitation rules.
Example 6 — Cross-border reinsurer
Facts: An Indian insurer contracts with a non-resident reinsurer and commission is netted against premium.
Solution: Do not assume the domestic Schedule III analysis alone answers every cross-border question. Review the contracting entity, place of supply, import-of-service/IGST provisions, any applicable exemption or special notification, and whether the conditions in the relevant entry are satisfied.
9. Accounting entries and reconciliation controls
Accounting entries must follow the actual contractual arrangement and the entity’s accounting policy. The following are illustrative ledger-control concepts, not mandatory journal formats.
| Event | Suggested control ledger / record | Review question |
|---|---|---|
| Premium received from insured | Gross premium collection / premium payable and output GST records as applicable | Does the tax return base reconcile to the entire premium? |
| Co-insurer share payable | Co-insurance apportionment payable | Does the settlement match policy share and premium register? |
| Reinsurance premium booked | Gross reinsurance premium expense/payable | Is gross premium distinguishable from commission and net remittance? |
| Ceding commission | Commission ledger / settlement adjustment | Does the statement reconcile to the gross-premium GST evidence? |
| Tax payment | Output tax / tax payment ledger | Can tax be traced to the relevant policies and return period? |
Maintain one reconciliation that connects contract or policy ID → gross premium → GST tax base → tax return/payment → co-insurer/reinsurer settlement → commission deduction → general ledger.
10. Input tax credit and return controls
The Schedule III treatment of a specified transaction does not by itself determine ITC eligibility on every related expense. Review ITC independently under the applicable provisions, restrictions, documentation requirements and use of the input/service.
- Separate the non-supply apportionment or commission flow from taxable third-party services such as consulting, software, data processing or brokerage.
- Reconcile tax invoices for independent taxable services with GSTR-2B and the purchase ledger.
- For output GST on gross premiums, reconcile policy-wise premium data with tax returns and payment records.
- For any cross-border service, conduct a separate import-of-service and place-of-supply review.
- Do not post a single net settlement entry that hides gross premium, commission, tax and the co-insurer share.
11. Contract and document checklist
- Policy and co-insurance agreement
- Participation percentages
- Premium receipt and collection report
- Gross-premium tax working
- GST return and payment evidence
- Apportionment statement and bank proof
- Reinsurance treaty / contract
- Gross premium calculation
- Ceding commission statement
- Net settlement advice
- Reinsurer’s tax invoice/statement where relevant
- Evidence of tax paid on gross premium
Documents should be contemporaneous, internally consistent and linked by a unique policy/treaty reference. If the lead insurer or reinsurer is responsible for the relevant tax payment, obtain the evidence rather than relying only on a contractual representation.
12. Common mistakes and audit risks
| Common mistake | Why it is risky | Better control |
|---|---|---|
| Tax calculated only on lead insurer’s retained share | May fail the express condition to pay GST on the entire insured premium. | Compare policy gross premium to tax return and payment. |
| Reinsurance GST checked only on net remittance | Commission deducted may cause gross premium to be understated. | Maintain gross-to-net bridge for every treaty statement. |
| All fees treated as Schedule III | Independent brokerage, technology, administration or other services may be distinct supplies. | Review each contract line and invoice separately. |
| Historical regularisation treated as automatic refund | “As is where is” does not establish a universal refund/credit entitlement. | Check facts, limitation and statutory procedure. |
| No proof of lead insurer/reinsurer tax payment | Key condition cannot be evidenced in audit. | Request and archive tax working, return and payment trail. |
| Cross-border contract treated like a domestic treaty | Place-of-supply and import-of-service questions may be missed. | Perform separate international GST review. |
13. Operational scenarios by team
Owns the statutory analysis, gross-premium reconciliation, tax return linkage and review of conditions.
Ensures policy number, insured, premium, participation ratio and endorsement history are accurate.
Reconciles treaty statements, gross premium, ceding commission, brokerage and cash settlements.
Selects policy samples and traces each from contract to gross premium, tax payment and apportionment or net settlement.
Builds separate fields for gross premium, tax amount, co-insurer percentage, ceding commission, net remittance and evidence status.
14. Month-end checklist
| # | Control | Evidence |
|---|---|---|
| 1 | Identify all co-insurance policies and reinsurance settlements for the month. | Policy/treaty register |
| 2 | Reconcile gross premium to premium collection records. | Premium report and bank ledger |
| 3 | Verify tax on entire insured premium for relevant co-insurance arrangements. | Tax working, return and payment evidence |
| 4 | Reconcile co-insurer apportionment to participation percentages. | Apportionment statements |
| 5 | Reconcile gross reinsurance premium, ceding commission and net remittance. | Treaty statements and bank records |
| 6 | Verify tax on gross reinsurance premium inclusive of commission where the Schedule III condition applies. | Reinsurer tax evidence |
| 7 | Identify independent taxable service fees separately. | Brokerage/technology/admin invoices |
| 8 | Reconcile ledgers and GST returns; investigate all variances. | Signed month-end review |
15. Frequently asked questions
1. Is co-insurance premium apportioned by a lead insurer always outside GST?
No. The specified Schedule III treatment is subject to the condition that the lead insurer pays applicable GST on the entire premium paid by the insured for the jointly supplied insurance services.
2. Should the lead insurer pay GST only on its own share?
For the specified entry, the condition refers to GST on the entire amount of premium paid by the insured. A retained-share-only calculation may not satisfy that condition.
3. What is ceding commission?
It is a commission/allowance under a reinsurance arrangement that may be deducted from the reinsurance premium payable by the insurer to the reinsurer.
4. Is GST checked on net reinsurance remittance?
The specified condition refers to the gross reinsurance premium inclusive of the ceding/reinsurance commission. Reconcile gross and net amounts separately.
5. From when did the relevant Schedule III amendment apply?
The relevant entries took effect from 1 November 2024. Verify the effective date and applicable enactment for the specific transaction.
6. What happens to the period before 1 November 2024?
Circular No. 244/01/2025-GST states that payment of GST on the specified activities from 1 July 2017 to 31 October 2024 was regularised on an “as is where is” basis. This is not automatically a refund entitlement.
7. Does the circular cover every fee charged in insurance arrangements?
No. Independent brokerage, administration, technology, data processing or other service fees must be analysed on their own facts and contracts.
8. What evidence should a co-insurer obtain?
Keep the policy, participation schedule, premium apportionment statement and sufficient evidence that the lead insurer paid GST on the entire insured premium.
9. What evidence should an insurer retain for ceding commission?
Keep the reinsurance contract, gross premium calculation, commission statement, net settlement advice and evidence supporting GST payment on the gross premium inclusive of commission.
10. Can the historical circular automatically support a credit note?
No. Check the specific facts, statutory provisions, limitation and procedure before issuing a credit note, adjusting returns or claiming a refund.
11. Does Schedule III automatically settle ITC on related expenses?
No. ITC eligibility on related inputs and services must be tested separately under the applicable provisions and restrictions.
12. What is the most important month-end control?
Maintain a policy/treaty-wise bridge from gross premium to GST paid, co-insurer apportionment or ceding commission, and net cash settlement.
16. Related GST resources
Explore your existing GST Knowledge Hub for related compliance and industry guides.
Browse the full practical GST article library.
Review the distinction between funding and consideration for services.
Review allocation and inter-entity GST compliance.
This guide is for practical education, not transaction-specific legal advice. Check the current CGST/SGST/IGST Acts, notifications, circulars and contracts for the relevant period before finalising a position.