GENERAL INSURANCE
Date of Introduction: 01.07.1994 vide Notification No.1/94-ST dt. 20.06.1994.
Definition: “Insurer” means any person carrying on General Insurance Business in India. (Section 65(33) of Finance Act, 1994 as amended)
“General Insurance Business” has the meaning assigned to it in Clause (g) of Section 3 of the General Insurance Business (nationalization) Act, 1972. The said clause (g) provides that “general insurance business” means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them. (Section 65(27) of Finance Act, 1994 as amended)
Taxable events and scope of service:
Taxable service means any service provided to a policyholder, by an insurer carrying on general insurance business. (Section 65(72)(d) of Finance Act, 1994 as amended)
Value of Taxable Service:
In the case of Insurance, the value of taxable service shall be the gross amount of the premium charged by the service provider viz., insurer from the policyholders.
(Section 65(67) of Finance Act, 1994 as amended)
The General Insurance business is carried on mainly by five public sector Insurance Corporations, viz., GIC, NIAC, NIC, OIC & UIC. Though the service tax is collected by the brokers along with the premium yet registration and payment obligations are complied by the Head office of each corporation. Each corporation will furnish a list of their Divisions and Branch offices along with the accounts maintained by them. As Private Insurance Corporations are being licensed now Commissioners may device suitable procedure in this regard in consultation with the Companies.
Exemptions & Exclusions:
| (i) |
Following activities under insurance are exempt from the levy of Service Tax. |
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| (b) | General insurance service provided to U.N or International organizations. | |
| (c) | Services provided to policyholder of Jan Arogya Bima policy in relation to General Insurance business. | |
| (d) | General insurance business for non life insurance premium to specified Diplomatic mission. | |
| (e) | Personal Accident social security and Hut Insurance Scheme. | |
| (f) | Comprehensive crop Insurance Scheme. | |
| (g) | Cattle Insurance under Integrated Rural Development Programme. | |
| (h) | Janata Personal Accident Policy and Gramin Accident Policy. | |
| (i) | Group Personal Accident Policy for self-employed women. | |
| (j) | Agricultural Pumpset and failed well Insurance. | |
| (k) | Premia collected on insurance of Export of goods from India and Export Credit Insurance. | |
| (l) | Premium received from Re-insurance both domestic and overseas. | |
| (m) | All business for which premium is booked outside India. | |
| (n) | Small transactions involving premium of less than rupees fifty except Motor insurance. | |
| (o) | Group personal accident scheme in relation to General Insurance Business for the employees of Government of Rajasthan. | |
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(Authority: - Notification No. 3/94-ST dt. 30.06.1994, No. 10/96 dt.26.11.1996, 12/97-ST dt. 14.02.1997, 48/98-ST dt.24.04.1998 & 1/2000-ST dt.09.02.2000) |
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| (ii) |
The Central Government vide Notification No. 3/2000-ST, dt. 06.07.2000 has exempted premium paid for general insurance business in relation to National Agricultural Insurance Scheme or Pilot Scheme. This exemption from the whole of taxable services leviable under Section 66 of the Act. The term National Agricultural Insurance scheme is also called Rashtriya Krishi Bima Yojana. |
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| (iii) |
The Central Govt. has exempted vide Notification No. 4/2000-ST, dt. 31.07.2000 from the whole of taxable services levied in relation to general insurance provided under the Central Sector Scheme on Cattle Insurance. This exemption is meant for social upliftment in relation to cattle breeding. |
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| (iv) |
Service provided in relation to Life Insurance is not covered by Statute and hence not leviable to Service Tax. |
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| (v) |
The service tax on general insurance business was made, w.e.f., 01.07.1994. So policies issued prior to 01.07.1994 even though the premiums were paid earlier but policies continue to be effective subsequently and also in cases where premiums are being paid after 01.07.1997 are not covered by the levy. In both the above situations, the risks continues to be covered after 01.07.1997 (Refer F.No.150/1197-CX.4 dt. 02.03.1997) |
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| (vi) |
When the amount of risks covered is very large, the lead insurer shares the risk with other co-insurers. The lead company receives the entire amount along with the coinsurers. Since premium is received from policyholders by the lead company, service tax is payable by that company. (Ref. F. No. 150/1194-CX.4 dt.02.03.1996) |
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