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Wednesday, Apr 17, 2002

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Longer wait for insurance service tax review

Hema Ramakrishnan

NEW DELHI: LIFE insurance companies, which have sought a review of the Budget proposal to impose a five per cent service tax, will have to wait till June this year for a final verdict from the Finance Ministry.

According to senior Revenue Department officials, any review of the proposal to impose service tax on life insurance including auxiliary service relating to insurance, will be done only after the passage of the Finance Bill in Parliament. Although the five per cent service tax on life insurance has been proposed in the Finance Bill 2002, the levy comes into force only after a notified date. Exemptions, if any, will form a part of the notification on service tax to be issued later by the Central Board of Excise and Customs (CBEC), said officials.

Last year, for instance, while the Finance Bill was enacted in May, the service tax notification was issued only in mid-July. Hence, the levy for new service providers who were brought under the tax net came into force only from the notified date. Minor exemptions - such as the roll back of the levy for individual photographers - were also announced only in July.

"The Ministry plans to hold consultations with different groups - i.e. new service providers who are proposed to be brought under the tax net - before taking a final view," said officials. The Budget has proposed clamping the levy on 10 new services.

Life insurance companies reckon that the levy should not be imposed on existing policy holders. A case for reconsidering the proposal was also made at the National Executive meet of the Bhartiya Janata Party at Panaji last week.

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