Services provided by financial sector regulators, SEBI, Insurance Regulatory and Development Authority (IRDA) besides Employees’ Provident Fund Organisation (EPFO) have been exempted from service tax in the Union Budget effective April 1. Earlier, their services were charged at 14 per cent.
Tejesh Chitlangi, Partner, IC Legal, said, “The services provided by SEBI were not specifically exempted or kept in the negative list, which resulted in a huge service tax demand which SEBI had contested. The move to specifically exempt the regulators, such as SEBI and IRDA from service tax ambit would be helpful for the intermediaries and other entities paying fee to such regulators, since they would not have to incur any additional costs on account of service tax levy.”
The service of life insurance business provided by way of annuity under the National Pension System regulated by the Pension Fund Regulatory and Development Authority (PFRDA) has been exempted from service tax, from the existing 3.5 per cent.
Other services Another service which has benefited from reduction in service tax is single premium annuity policies, tax on which has been reduced to 1.4 per cent from 3.5 per cent. This, however, is applicable for cases where the amount allocated for investment, or savings on behalf of policy holder, is not intimated to the policy holder at the time of providing of service, effective April 1 this year.
Arijit Basu, MD & CEO, SBI Life Insurance, said, “The reduction of service tax on single premium annuity policies to 1.4 per cent from 3.5 per cent will help reduce the cost of policy, the benefits of which will be passed on to the consumers.”
Finally, general insurance services provided under ‘Niramaya’ Health Insurance scheme launched by National Trust for the Welfare of Persons with autism, cerebral palsy, mental retardation and multiple disability in collaboration with private/public insurance companies are being exempted from service tax effective April 1, down from the current 14 per cent.