Accounts Notes: Service Tax on General Insurance Service

Saturday 2 July 2011

Service Tax on General Insurance Service

Indian Service Tax
General Insurance Service

Effective Date: 01/07/1994.

Authority: Notification No. 1/94-ST, dt. 20/6/1994 (for full text of Notification see under'Telephone Service').

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%.
Definition

"General Insurance Business" has the meaning assigned to it in clause (g) of Section 3 ofthe General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), [Section 65(49)]

Taxable service: Insurance service provided by the insurer to the policy holder in relation to General Insurance business.

Value of taxable service: Amount of the premium received by the insurer from policy holders.

Person liable to pay: Insurer carrying on general insurance business.
Head of Account

Minor-head

004400102

General Insurance Services

S1. Code

SCCD

Sub-head

00440010201

Tax Collection

00440005

117

Sub-head

00440010202

Other Receipts

00440006

112

Sub-head

00440010203

Deduct Refunds

00440120

119
Questions & Answers

Q. 1 What is the taxable service under insurance sector?

Ans. Taxable service under insurance sector is the service provided to a policy holder, by an insurer carrying on general insurance business, i.e. fire, marine and miscellaneous insurance business.

Q. 2 What is the value of taxable service in case of Insurance Services?

Ans. In the case of Insurance services, the value of taxable service is the total amount of premium received by the insurer from policyholder.

Q. 3 Are any of the Insurance activities exempted from the levy of Service Tax? If so, what are they?

Ans. Following activities under insurance sector are exempt from the levy of Service Tax.

Life Insurance

General insurance services provided to U.N. or International organisations.

Services provided to policy holder of Jan Arogya Bima policy in relation to General Insurance business.

General insurance business for non life insurance premium to specified Diplomatic mission.

Personal Accident, social security and Hut Insurance Scheme.

Comprehensive crop Insurance Scheme.

Cattle Insurance under Integrated Rural Development Programme.

Janata Personal Accident Policy and Gramin Accident Policy.

Group Personal Accident Policy for self-employed women.

Agricultural Pumpset and failed well Insurance.

Premia collected on insurance of Export of goods from India and Export Credit Insurance.

Premium received from Re-insurance both domestic and overseas.

All business for which premium is booked outside India.

Small transactions involving premium of less than rupees fifty except Motor insurance.

(Authority: Notfn.3/94-ST, dt. 30/6/96, No. 10/97-ST, dated 26/11/96 and 12/97-ST, dated 14/2/97).

[Source CBEC Website]
Main text of Departmental Circular/TN

[TN No. 111/94, dated 05/07/1994 of Hyderabad Commissionerate]

In relation to General Insurance business also the facility of one point payment of service tax by the Chairman or Chairman-cum-Managing Director of the insurance companies has been extended. For this purpose, the service tax will be paid by GIC and New India Assurance Company Ltd.,

in Bombay, National Insurance Company will be paying the tax in Calcutta, Oriental Insurance Company will be paying the tax in Delhi. The United India Insurance Company Ltd., will be paying the service tax in Madras. The branches and divisions of the insurance companies will not pay the service tax and it is their head office which has been made responsible for payment of service tax. They will apply for registration to the jurisdictional CCEs. The jurisdictional CCEs may advise them to furnish a list of their offices with addresses who will be involved in the mechanism of collection of service tax and from whom returns indicating computation of service tax is furnished to their Head Office. These assessees will be required to furnish at the time of filing their quarterly return for the first time, a list of accounts maintained by them. This will include the statement that they receive from their banks/division offices for their headquarters for consolidation of service tax figures.