# Co-insurance and Reinsurance under GST

## A. Co-insurance Arrangement

When multiple insurers jointly cover a risk (say 50:50), arrangement:

Lead insurer issues policy and collects gross premium from insured.
Lead insurer shares premium with co-insurer per agreed ratio.

### Tax Treatment

GST charged on gross premium by the lead insurer to the insured. ✓
Premium shared between lead and co-insurer → No GST on the sharing.

## B. Reinsurance Arrangement

Insurer transfers part of its risk to a re-insurer:

Insurer collects gross premium from policyholder (GST applies).
Insurer pays reinsurance premium to re-insurer (GST applies on reinsurance premium too).
Re-insurer pays reinsurance commission to insurer → No GST on reinsurance commission.

## Summary

Transaction	GST?
Gross premium to insured	Yes
Co-insurance premium sharing	No
Reinsurance premium	Yes
Reinsurance commission	No

Worked example

### Example 1

Co-insurance Example: LIC and Re leader share 50:50. LIC collects ₹1,00,000 gross premium + GST from insured. LIC transfers ₹50,000 to Re. → GST only on the ₹1,00,000 gross premium. ₹50,000 sharing has no GST.

### Example 2

Reinsurance Example: LIC collects ₹1,00,000 gross premium from policyholder (GST chargeable). LIC pays ₹70,000 to re-insurer as reinsurance premium (GST chargeable). Re-insurer pays ₹10,000 commission to LIC → No GST on the commission.

⚠️ Common exam mistakes

Charging GST on co-insurance premium sharing — it is exempt.
Forgetting that reinsurance premium itself is taxable, even though commission flowing back is not.

Reference: — Notification / Circular (specific co-insurance and reinsurance clarifications)

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Insurance and Reinsurance — Co-insurance and Re-insurance Tax Treatment

Worked example

⚠️ Common exam mistakes