Mumbai: Life insurance agents are likely to be waived from payment of service tax if their total annual commission income does not exceed Rs 8 lakh. Though in principle the notification dated March 1, 2005, let away from tax, services of aggregate value not exceeding Rs 8 lakh in a year the benefit of the exemption is not extended to insurance companies that pay the tax on behalf of their agents. This differential treatment of life insurance auxiliary services likely to get corrected in the 2008-09 Union Budget.
The benefit of exemption up to the threshold limit is not extended to such cases where service tax is paid by the recipient of service on behalf of the provider of service. In the case of life insurance agents, the service tax (12.36 per cent) is paid by insurance companies which then deduct the amount from the commission of their agents. Life insurers have made a submission to the finance ministry, asking that the benefit of service tax exemption below the threshold limit of Rs 8,00,000 in a year likely to be extended to all service gives such as insurance agents, notwithstanding that the actual remittance of the tax is made by the principal, namely, the insurance company, which is in fact a procedure to ensure efficiency of collection.
The benefit of exemption up to the threshold limit is not extended to such cases where service tax is paid by the recipient of service on behalf of the provider of service. In the case of life insurance agents, the service tax (12.36 per cent) is paid by insurance companies which then deduct the amount from the commission of their agents. Life insurers have made a submission to the finance ministry, asking that the benefit of service tax exemption below the threshold limit of Rs 8,00,000 in a year likely to be extended to all service gives such as insurance agents, notwithstanding that the actual remittance of the tax is made by the principal, namely, the insurance company, which is in fact a procedure to ensure efficiency of collection.
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