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Saturday, January 12, 2008

"Insurance Agent" has the meaning assigned to it in clause (10) of Section 2 of the Insurance A9t, 1938 (4 of 1938), [Section 65 (54)].

Indian Service Tax

Insurance Auxiliary Service

Effective Date: 16/07/2001.

Authority: Notification No. 4/2001-ST, dt. 9/7/2001 (for full text of Notification see under Broadcasting).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"Insurance Agent" has the meaning assigned to it in clause (10) of Section 2 of the Insurance A9t, 1938 (4 of 1938), [Section 65 (54)].

"Insurance Auxiliary Service"means any service provided by an actuary, an intermediary or insurance intermediary or an insurance agent in relation to general insurance business or life insurance business and includes risk assessment, claim settlement, survey and loss assessment, [Section 65 (55)]

"Intermediary or Insurance Intermediary" has the meaning assigned to it in clause (f) of sub-section (1) of Section 2 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), [Section 65 (56)]

"Insurer" means any person carrying on the general insurance business or life insurance business in India, [Section 65 (58)]

Taxable service: Taxable service means any service provided to a policyholder or insurer by an actuary, or intermediary or insurance intermediary or insurance agent, in relation to Insurance Auxiliary Services concerning life insurance business, [Section 65 (105) (zy)].

Value of taxable service: The commission, fee or any other sum received by any actuary or intermediary or insurance intermediary or insurance agent from the insurer shall be included in the value of this taxable service.

Exemption

(i) Life Insurance - Travelling, boarding and lodging expenses with document any evidence - ENo. B-II/I/2000-TRU, dt. 9/7/2001 - Annexure VI

Person liable to pay: General Insurance Company.

Head of Account




S1.Code

SCCD

Minor-head

004400142

Insurance Auxiliary Services

00440168


Sub-head

00440014201

Tax Collection

00440169

116

Sub-head

00440014202

Other Receipts

00440170

112

Sub-head

00440014203

Deduct Refunds

00440171

119

Main text of Departmental Circular/TN

[Ministry's ENo. B.II/I/2000-TRU dated 9.7.2001 - Annexure VI]

1. As per Section 65 (31)*, "Insurance Auxiliary Service" means any service provided by an actuary, an intermediary or insurance intermediary or an insurance agent in relation to general insurance business and includes risk assessment, claim settlement, survey and loss assessment. As per Section 65 (72) (zl), the taxable service is any service provided to a policy holder or insurer by an actuary or intermediary or insurance intermediary or insurance agent, in relation to Insurance Auxiliary Service.

2. Services covered in this category are the services provided by the insurance agents to the insurance company in relation to marketing of insurance policies. They also provide service to the policy holder by providing information/ advice on the types of insurance policies, processing of documentation, remitting of insurance premium, etc. Actuarial services are provided by the actuaries to the insurance companies. They cover diverse fields such as calculating insurance risks and premia, insurance claims adjustment services such as services of investigating claims, determining the amount of loss or damages covered by the insurance policies and negotiating settlements, services of examining claims which have been investigated and authorisation of payments and damage assessment services, administration of insurance including salvage administration and insurance consultancy services. It may be emphasized that only such services are taxable which are in relation to general insurance business such as motor vehicle insurance, insurance of buildings and other properties, marine insurance, fire insurance and other miscellaneous insurance. Services provided in relation to life insurance are not taxable.

3. The service providers are insurance agents, insurance surveyors and loss adjusters, actuaries and insurance consultants. In the case of insurance surveyors and loss adjusters, actuaries and insurance consultants, the service is provided mainly to the insurance companies (insurer) while in the case of insurance agents, the service is provided to both the insurer and the policy holder. Service tax is liable to be paid by the Insurance Auxiliary Service provider except in case of insurance agents. Insurance agents normally do not charge the policy holder. However, the insurance company pays the agent a commission (usually as a percentage of the insurance premium) on a periodic basis. In the case of an insurance agent, it has been provided in the Service Tax Rules that the person liable to pay service tax will be the concerned insurance company who has appointed the agent. Notification No. 5/2001-ST refers.

4. The service tax is applicable to services provided on or after 16th July 2001 and any payment made for the services provided prior to this date will not liable to tax eventhough payment is made on or after the 16th July 2001.

5. A point has been raised that the service provider, namely, an actuary, an intermediary or insurance intermediary or an insurance agent is reimbursed certain out of pocket expenses such as travelling expenses, boarding and lodging charges on actual basis. These expenses are reimbursed in addition to the prescribed fee. Whether such reimbursements. will be included in the taxable value? In this regard it is clarified that the amount billed to the client on account of out of pocket expenses which are reimbursable on actual basis, such as travelling, boarding and lodging expenses, the same are not subject to service tax. In this respect, the assessee may be required to provide documentary evidence substantiating his claim.

6. Another point raised is to whether in cases where the bills raised by the service provider are revised, the service tax is payable on the billed amount or on the actual amount received. In this regard it is clarified that Rule 6 of the Service Tax Rules, 1994, provides for payment of service tax only on the amount received and not on the amount raised .for the services provided. As such service tax is payable on the amount actually received.

Life Insurance including Insurance Auxiliary Service relating to Life Insurance

F. No. Bll/1I2002-TRU, Date: 1/8/2002

1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub­clause or clause means clause or sub-clause of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.

2. Clause (51) defines "Life Insurance Business" as to have meaning assigned to it in clause (11) of Section 2 of the Insurance Act, 1938. The taxable service has been defined in clause 90(zx) of Section 65 as "any service provided, to a policy holder, by a insurer carrying on life insurance business, in relation to life insurance business".

3. Definition of "Life Insurance Business" as per the aforesaid section of the Insurance Act, 1938 is as follows:

"Life Insurance Business" means the business of effecting contracts of insurance upon human life, including and contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include­

(a) the granting of disability and double or triple indemnity accident benefit, if so provided in the contract of insurance,

(b) the granting of .annuities upon human life, and

(c) the granting of superannuation allowances and annuity payable out of any fund applicable solely to the relief and maintenance of person engaged in any particular profession, trade or employment or of the dependent of such person.

4. It has been decided to exempt the service tax leviable on life insurance service (refer to Notification No. 9/2002-ST, dated 1/8/2002). As a result, service tax is not payable on the service provided by an insurer to a policy holder in relation to. life insurance business.

5. Insurance Auxiliary Services relating to general insurance business were brought into tax net last year w.e.f. 16/7/2001. This levy has now been extended to cover the Insurance Auxiliary Service relating to life insurance also.

5.1 Services covered in this category are the services provided by the insurance agents to the insurer/policy holder, by actuary to the insurer or by an intermediary or insurance intermediary to insurer/policy holders. Insurance agents provide service to insurance company in relation to marketing of insurance policies. They also provide service to the policy holder by providing information! advice on the types of insurance policies, processing of documentation, remitting of insurance premium, etc. Actuarial services are provided by the actuaries to the insurance companies. They cover diverse fields such as calculating insurance risks and premia, insurance claims adjustment services such as services of investigating claims, determining the amount of loss or damages covered by the insurance policies and negotiating settlements, services of examining claims which have been investigated and authorisation of payments and damage assessment services, administration of insurance including salvage administration and insurance consultancy services.

5.2 The service providers in this category includes insurance agents, insurance surveyors and loss adjusters, actuaries insurance consultants and insurance brokers. In the case of insurance surveyors and loss adjusters, actuaries and insurance consultants, the service is provided mainly to the insurance companies (insurer) while in the case of insurance agents, the service is provided to both the insurer and the policy holder. Service tax is liable to be paid by the Insurance Auxiliary Service provider except in case of insurance agents. Insurance agents normally do not charge the policy holder. However, the insurance company pays the agent a commission (usually as a percentage of the insurance premium) on a periodic basis. As is the case in respect of general insurance business, it has been provided in the Service Tax Rules that in the case of an insurance agent for life insurance, the person liable to pay service tax will be the concerned insurance company who has appointed the agent. Noti. No. 12/2002-ST refers.

6. The service tax is applicable to services provided on or after 16/8/2002 and any payment made for the services provided prior to this date will not liable to tax eventhough payment is made on or after the 16/8/2002.

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