Professional Documents
Culture Documents
While the largest component of GDP in the country comes from the Service
Sector, its contribution to the national treasury had been insignificant. With the
increase in income , increasing portion of such incomes is spent on the consumption
of services like entertainment, travel and tourism, etc. Though there exist various
taxes or duties like Union Excise Duties, VAT, Sales Tax, Entry Tax, or Octroi Duty,
etc by Central or State Government, most of the services are not directly subject to
taxation. Thus production and consumption of services, which constitute a large
growing portion of the economy, contribute very little by way of taxation. Extending
the tax to the service sector was not only to ensure neutrality and horizontal equity in
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taxation but also to broaden the tax base and improve revenue productivity of tax
system.
INSURANCE
When Insurance business was nationalized only life insurance corporation of
India (L.I.C) and General Insurance Corporation of India (G.I.C) and its subsidiaries
were allowed to do business. But with the opening up of the insurance sector for
private participants like ICICI, HDFC, UTI etc the potential for generation of business
has increased . This has also increased the dependence on intermediaries (or agents)
for generation of business.
As per sec 65(58), Insurer means any person carrying on general insurance
business or life insurance business in India.
Insured is any individual who takes the insurance policy from the insurance
company. He is the one whose risk is covered by the insured.
Policy Holder includes a person to whom the whole of the insurable interest of
the policy holder in the policy is assigned once and for all is full and absolute but does
not include an assignee.
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Insurance Broker is a person between a company and insured and who solicits
business for the company from the public.
Insurance Consultants are advisors who advice their client on the nature type
and various other aspects of insurance policy.
Reinsures are brokers who are engaged in the business of reinsurance. Where
an insurance company in order to cover their risk re-insures themselves with another
insurance company, which is called re-insurance.
Loss Assessors make assessments of the loss suffered by the insured and
submit there report to the insurance company.
The term person will generally include not only natural person but artificial
persons like partnership firm, HUF, corporate bodies, association or body of
individual , charitable institutions , government undertaking, co-operative societies etc
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The service providers are insurance agents, insurance surveyors and loss
adjusters, actuaries and insurance consultants.
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 GDP payment is made on or after the 16th July 2001.
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 traveling expenses, boarding and lodging charges on
actual basis.
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a) An actuary or
c) An insurance agent.
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a) Risk assessment.
b) Claim assessment.
c) Survey.
d) Loss assessment.
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TAXABLE VALUE
Value of taxable service shall be the gross amount charged by the service
provider for such service rendered by him, includes the commission, fee or any other
sum received by actuary or intermediary or insurance intermediary or insurance agent
from insurer.
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 only on the amount actually received.
It has been decided to exempt the service tax leviable on life insurance business
(as per Notification No. 9/2002 ST dated 1-82002) 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.
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Any other person carrying on general insurance business and who has
obtained a certificate of registration under sec.3 of insurance act, 1938.
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The service tax 10.2 per cent on premiums adds to the price of insurance. To
help keep premium low for rural poor, government could consider waiver of Service
Tax on micro-insurance products for a limited period. THE UN DEVELOPMENT
PROGRAMME (UNDP) report said.
Insurance products made for the urban population cannot be suitable for their
rural counterparts. They may need insurance for a single tree or insurance against
snakebite, the things that affect them more frequently and directly. The report
suggested pooling of data between insurance companies and the government as
‘building and sharing claims histories can help in aligning pricing decisions with
actuarial calculations, thereby reducing price’.
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Life insurance agents are likely to be exempted from payment of sevice tax if
their total annual commission income does not exceed Rs. 8 lakhs. Though in
principle the notification dated March 1, 2005, exempts from tax, service of aggregate
value not exceeding Rs.8 lakh in a year (which brings into the ambit around 90
percent of the 20 lakh life insurance agents in a country), the benefit of the exemption
is not extended to insurance companies that pay the tax on behalf of their agents.
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Life insurers have made submission to the finance ministry, requesting that “the
benefit of service tax exempted below the threshold limit of Rs. 8,00,000 in a year
may be extended to all service providers such as insurance agents, not withstanding
that the actual remittance of the tax is made by the principle, namely, the insurance
company, which is in fact a procedure to ensure efficiency of collection”
CENVAT CREDIT
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CONCLUSION
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