Availability of CENVAT Credit on DICGC Insurance Premium

The High Court of Karnataka delivered a significant judgment affirming the eligibility of banks to avail CENVAT credit on service tax paid towards Deposit Insurance and Credit Guarantee Corporation (“DICGC”) insurance premiums. 

The Court dismissed a batch of Revenue appeals and upheld the view that deposit insurance services received from DICGC constitute “input services” for banks engaged in the business of banking and financial services. 

The Court followed the earlier judgments of the Kerala High Court in South Indian Bank and the Bombay High Court in Yes Bank Ltd., thereby reinforcing the emerging judicial consensus that DICGC insurance is integrally connected with banking operations and regulatory compliance and therefore qualifies for CENVAT credit under the CENVAT Credit Rules, 2004.