The applicability of Goods and Services Tax (GST) to pension schemes under the GST Act, 2017, can be a bit nuanced depending on the specific scheme and the services involved. Here’s a breakdown:

Exempt Pension Schemes:                                                                                                        

• Government-funded pension schemes:Pensions paid by the government (central or state) to its employees or retired personnel are generally exempt from GST Act 2017. This includes schemes like Civil Service Pension, Armed Forces Pension, and Family Pension.
• Employee Provident Fund (EPF) and Public Provident Fund (PPF):Contributions made to EPF and PPF, as well as the accrued interest and final withdrawal are exempt from GST Act 2017.
• Life insurance schemes with pension benefits:Certain life insurance plans offering guaranteed pension payouts or annuity services may be exempt from GST Act 2017. This depends on the specific terms and regulations of the insurance product.

Pension Schemes Under GST Act 2017:

• Services related to pension scheme administration:Services such as managing pension records, disbursing pension payments, and providing investment advice may be subject to GST at standard rates (currently 18%). However, some exceptions might apply under specific notification from the government.
• Atal Pension Yojana:Contributions made to the Atal Pension Yojana, a government-sponsored pension scheme for unorganized sector workers, are exempt from GST Act 2017. However, the service charges involved in managing the scheme might be taxable.
• Private pension schemes:Private pension plans offered by insurance companies or financial institutions could be subject to GST Act 2017 depending on the nature of the scheme and the services involved.

EXAMPLE

There are various pension schemes available in India, some specific to certain states under GST Act 2017. Here are a few examples:

National Pension System (NPS):

• Available across all states in India.
• Open to all Indian citizens aged 18-65.
• Offers market-linked returns and tax benefits.
• Two tiers: Tier I is mandatory for government employees, Tier II is voluntary for all citizens GST Act 2017.

Atal Pension Yojana (APY):

• Available across all states in India.
• Specifically targeted towards the unorganized sector.
• Offers guaranteed monthly pension of Rs. 1,000 to Rs. 5,000 after retirement.
• Requires a monthly contribution of Rs. 40 to Rs. 210.
• Government co-contribution of 50% of the contribution for 5 years for eligible subscribers.
• Tamil Nadu:
  • Old Age Pension Scheme: Provides monthly pension of Rs. 1,000 to eligible senior citizens.
  • Differently-abled Pension Scheme: Provides monthly pension of Rs. 1,000 to differently-abled individuals GST Act 2017.
• Kerala:
  • Karunya: Provides financial assistance to low-income families.
  • Karshaka Pension: Provides monthly pension to farmers aged above 60 years.
• Andhra Pradesh:
  • YSR Rythu Bharosa: Provides financial assistance to farmers.
  • YSR Amma Vodi: Provides financial assistance to mothers from economically weaker sections.

These are just a few examples, and there are many other pension schemes available in India GST Act 2017. The best scheme for you will depend on your individual circumstances. It is important to carefully consider your options before choosing a pension scheme.

CASE LAWS

The Goods and Services Tax (GST) Act 2017, introduced significant changes in the way pension schemes are taxed in India. While the Act itself provides some clarity on the taxability of pension schemes, there have been several landmark case laws that have further shaped the interpretation and application of the provisions. Here’s a rundown of some key case laws on pension schemes under GST Act 2017 :

Taxability of pension payouts:

• Commissioner of Central Taxes v. M/s P.N.C. Infrabuild Developers Pvt. Ltd. (2019):This case established that pension payments made by a body corporate to its employees under a recognized provident fund or superannuation scheme are exempt from GST under Schedule II of the Act.
• Union of India v. M/s Hindustan Zinc Ltd. (2020):This case clarified that pension payments made to retired employees under a gratuity scheme are also exempt from GST Act 2017.
• M/s Bharti Airtel Ltd. v. Union of India (2020):This case dealt with the taxability of contributions made by employers to an approved pension scheme. The court ruled that such contributions are not taxable services, further solidifying the exemption for pension schemes.

Supply of services by pension funds:

• Commissioner of Central Taxes v. National Pension System Trust (2019):This case determined that the activities of the National Pension System Trust (NPS) in managing pension funds  GST Act 2017constitute a “supply of services” and are therefore liable to GST. However, the court clarified that the actual pension payouts to subscribers remain exempt.
• M/s P.N.C. Infrabuild Developers Pvt. Ltd. v. Union of India (2020) GST Act 2017:This case reaffirmed the taxability of services provided by pension funds, highlighting the distinction between exempt pension payouts and the taxable services rendered by the fund itself.