The Hindu Business Line : Life insurers permitted to pay monthly service tax provisionally

The flexibility to pay provisional monthly service tax is being made available only to those insurers who decide to pay service tax on the risk premium certified by an appointed actuary.

New Delhi , Sept. 14

LIFE insurers opting to pay service tax on the risk premium certified by an appointed actuary have cause for cheer. The Finance Ministry has now permitted such insurance companies to pay monthly service tax provisionally on the basis of estimates.

Informed sources said that the Revenue Department has now held that the monthly estimated (provisional) service tax payment for the entire insurance company could 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 liability would be finalised and the insurer could pay the balance service tax or adjust the excess tax.

The flexibility to pay provisional monthly service tax is being made available only to those insurers who decide to pay service tax on the risk premium certified by an appointed actuary.

While bringing life insurance services under the service tax net with effect from September 10, the Finance Ministry had held that the service tax would only be levied on that portion of the service, which pertains to the risk element.

Further, life insurers are allowed, in the case of composite policies (risk plus savings), to opt for payment of 1 per cent of the total premium towards discharge of service tax liability. However, insurance companies who want to pay service tax on the risk premium certified by the appointed actuary have been permitted to do so.

The Finance Ministry has also made it clear that the option of payment of 1 per cent of the total premium would not be available in case an insurance policy is towards risk only or where the portion of the premium payable towards risk cover in life insurance is shown separately in any of the documents issued by the insurer to the policyholder.

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