Indian Service Tax
Life Insurance Service
Effective Date: 16/08/2002.
Authority: Notification No. 8/2002-ST, dt. 1/8/2002 (for full text of Notification see under'Beauty Parlour').
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:
"Life Insurance Business" has the meaning assigned to it in clause (11) of Section 2 of the Insurance Act, 1938 (4 of 1938), [Section 65 (61)]"policy holder"has the meaning assigned to it in clause (2) of Section 2 of the Insurance Act, 1938 (4 of 1938), [Section 65 (80)]
Taxable service: Life insurance services provided to a policy holder by an insurer carrying on life insurance business or by an actuary or intermediary or insurance intermediary or insurance agent in relation to insurance auxiliary services concerning life insurance business.
Person liable to pay: Insurer.
Value of taxable service: Gross amount received for the services provided.
Head of Account
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Changes from 10/9/2004
F.No. B2/8/2004-TRU, Date: 10/9/2004
2.1 Life Insurance Services.
21.1 In Budget 2004, it has been decided to levy service tax on that portion of the service which pertains to risk element. The levy would not be applicable to such premium of the existing policies, which were paid before the new levy comes into force.
21.2 It has been provided that in the case of composite policies (risk plus savings) life insurer can at his option pay 1% of the total premium towards discharge of service tax liability. This shall not be applicable in case an insurance policy is towards risk only or where the premium gives details of risk premium and other premium seperately. (Refer Notification No. 11/2004-ST., dated
10/9/2004). However, those insurance companies who want to pay tax on risk premium as certified by the Appointed Actuary on a company basis can do so. The insurance companies may be allowed to pay monthly service tax provisionally, based on estimates. The monthly estimated (i.e. provisional) duty payment for the entire company would be based on a provisional certificate issued by the Appointed Actuary, subject to final certification at the end of the year. At the end of the financial year, when the sum at risk is calculated and certified by the Actuary, the liabilities would be finalized and the companies would pay the balance tax or adjust the excess tax paid.
Main text of Departmental Circular/TN
For full text of F.No. B.11/1/2002- TRU, dt. 1/8/2002 see under "Insurance Auxiliary Service".
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