GST on Co-Insurance Apportionment and Reinsurance Commission: What the Schedule III 'No Supply' Regularisation Means for Commercial Programme Costing in India

When a single large risk is shared by several insurers, the lead insurer collects the whole premium from the insured and apportions a share to each co-insurer. When an insurer cedes risk to a reinsurer, the reinsurer pays back a ceding or reinsurance commission. Both are internal market settlements between insurers, not separate sales to a customer, yet for years there was uncertainty about whether GST applied to them.

That uncertainty mattered for costing. If the apportionment of premium from a lead insurer to a co-insurer, or the commission flowing between an insurer and a reinsurer, attracted GST, it added a tax layer inside the insurance value chain that had nothing to do with the tax already charged to the insured on the premium. For a broker structuring a large co-insured programme, that ambiguity was a real variable in the total cost and a source of disputed past demands.

The 2024 changes resolve it by reclassifying these flows. They place co-insurance premium apportionment and reinsurance commission outside the scope of GST entirely, treating them as transactions that are neither a supply of goods nor a supply of services. The practical effect is to take a layer of potential tax and dispute out of how large shared risks are costed, which is why brokers placing those risks should understand exactly what changed.

The decision came from the 53rd GST Council meeting on 22 June 2024, which recommended that co-insurance premium apportioned by the lead insurer to a co-insurer, and ceding or reinsurance commission between insurer and reinsurer, be treated as no supply under Schedule III of the CGST Act, 2017.

Schedule III is the part of the law that lists activities treated as neither a supply of goods nor a supply of services, so once a transaction sits inside it, GST does not apply to it at all. Moving these two flows into Schedule III is therefore a clean answer rather than a rate change: it is not that the apportionment or commission is taxed at a lower rate, it is that it is outside the tax.

The recommendation was given legal force through the Finance (No. 2) Act, 2024 and made effective from 1 November 2024 via Notification No. 17/2024-Central Tax dated 27 September 2024.

So from 1 November 2024 onward, the apportionment of premium between co-insurers and the commission between insurers and reinsurers are, on the stated conditions, simply not GST events.

A reclassification like this raises an obvious question about the past: what happens to all the transactions that occurred while the position was uncertain. The answer is a clean line under history.

Past transactions from 1 July 2017 to 31 October 2024 were regularised on an 'as is where is' basis, meaning no fresh GST demand or refund for the prior period. The period runs from the introduction of GST to the day before the amendment took effect, so it covers the whole window of ambiguity.

The phrase 'as is where is' is doing specific work. It means the position is frozen as it actually stood: where GST was paid on these flows, it is not refunded; where it was not paid, no fresh demand is raised. Neither side reopens the past. For the market, this removes a tail of potential litigation over historic apportionment and commission, which is itself a meaningful certainty.

For a broker, the retrospective settlement matters mainly as context for client conversations about old programmes. A corporate buyer or an insurer counterparty asking whether a past co-insurance or reinsurance arrangement carries a lingering GST exposure can be told that the period to 31 October 2024 was regularised as is where is, so it is neither a source of refund claims nor of fresh demands. The forward position, from 1 November 2024, is the one that governs current costing.

The Schedule III treatment is not unconditional, and the conditions are where a broker has to pay attention, because relief that depends on a condition only holds if the condition is met.

For co-insurance, the apportionment relief is conditioned on the lead insurer having paid GST on the full premium collected from the insured. The logic is consistent: GST is charged once, on the whole premium the insured pays, at the lead insurer's hand. Because the tax has already been accounted for on the full premium, the internal apportionment of that premium to co-insurers is not a second taxable event. The condition keeps the relief honest: it applies precisely because the tax was paid on the whole premium up front, so taxing the apportionment again would be duplication.

For reinsurance, the commission between insurer and reinsurer is the covered flow, and retrocession, treated as reinsurance of reinsurance, is also covered. That extension matters for programmes that cede and then cede again, because it means the no-supply treatment follows the commission through the retrocession layer rather than stopping at the first cession.

1. Confirm the full-premium GST condition is satisfied on a co-insured placement, because the apportionment relief rests on it.
2. Recognise retrocession is included, so the treatment is consistent down a chain of reinsurance and reinsurance of reinsurance.
3. Read the relief as scope, not rate, which is what makes it durable in costing rather than a concession that might be revisited.

Getting the condition right is the difference between relying on the relief correctly and assuming it where it does not strictly apply.

Pulling the threads together, the amendment changes a specific and useful thing for a broker who places large co-insured or heavily reinsured risks: it removes a tax layer and a dispute risk from inside the programme, leaving the GST that matters, the tax on the premium the insured pays, as the relevant figure.

The practical reading for costing is direct. When several insurers share a risk, the lead insurer's apportionment of premium to the co-insurers is no longer a point where additional GST has to be assumed or argued about, provided the lead insurer has paid GST on the full premium. When risk is ceded to reinsurers, the ceding and reinsurance commission, and the commission on retrocession, sit outside GST as well. So the total cost of placing a large shared risk is cleaner and more predictable than it was while the position was uncertain, and historic programmes carry no reopened exposure for the period to 31 October 2024.

For a broker, the value is in being able to explain this confidently to corporate clients and insurer counterparties: what changed, from when, on what conditions, and how the past was settled. That clarity supports cleaner programme structuring and removes a question that used to cloud the economics of co-insurance and reinsurance.

Working through how these flows interact with each insurer's wordings, commission terms and co-insurance arrangements is exactly the kind of detail that decides whether a programme is costed correctly. Sarvada gives commercial insurance brokers structured, searchable access to insurer policy wordings and the intelligence around them, so the structuring and costing of co-insured and reinsured programmes rests on current rules and real terms rather than assumption. Request Access to keep your large-risk placements aligned with the Schedule III position and the conditions it depends on.