Annexure VI
Insurance auxiliary service:
1. As per section 65(31), "insurance auxiliary service" means any service provided
by an actuary, an intermediary or insurance intermediary or an insurance agent in
relation to general insurance business and includes risk assessment, claim
settlement, survey and loss assessment. As per section 65(72)(zl), the taxable
service is any service provided to a policy holder or insurer by an actuary or
intermediary or insurance intermediary or insurance agent, in relation to insurance
auxiliary service.
2. Services covered in this category are the services provided by the insurance
agents to the insurance company in relation to marketing of insurance policies.
They also provide service to the policy holder by providing information/advice on
the types of insurance policies, processing of documentation, remitting of insurance
premium, etc. Actuarial services are provided by the actuaries to the insurance
companies. They cover diverse fields such as calculating insurance risks and premia,
insurance claims adjustment services such as services of investigating claims,
determining the amount of loss or damages covered by the insurance policies and
negotiating settlements, services of examining claims which have been investigated
and authorisation of payments and damage assessment services, administration of
insurance including salvage administration and insurance consultancy services. It
may be emphasized that only such services are taxable which are in relation to
general insurance business such as motor vehicle insurance, insurance of buildings
and other properties, marine insurance, fire insurance and other miscellaneous
insurance. Services provided in relation to life insurance are not taxable.
3. The service providers are insurance agents, insurance surveyors and loss
adjusters, actuaries and insurance consultants. In the case of insurance surveyors
and loss adjusters, actuaries and insurance consultants, the service is provided
mainly to the insurance companies (insurer) while in the case of insurance agents,
the service is provided to both the insurer and the policy holder. Service tax is liable
to be paid by the insurance auxiliary service provider except in case of insurance
agents. Insurance agents normally do not charge the policy holder. However, the
insurance company pays the agent a commission (usually as a percentage of the
insurance premium) on a periodic basis. In the case of an insurance agent, it has
been provided in the Service Tax Rules that the person liable to pay service tax will
be the concerned insurance company who has appointed the agent. Notification no.
5/2001-ST refers.
4. The service tax is applicable to services provided on or after16th July 2001 and
any payment made for the services provided prior to this date will not liable to tax
even though payment is made on or after the 16th July 2001.
5. A point has been raised that the service provider, namely, an actuary, an
intermediary or insurance intermediary or an insurance agent is reimbursed certain
out of pocket expenses such as travelling expenses, boarding and lodging charges
on actual basis. These expenses are reimbursed in addition to the prescribed fee.
Whether such reimbursements will be included in the taxable value? In this regard it
is clarified that the amount billed to the client on account of out of pocket
expenses which are reimbursable on actual basis, such as travelling, boarding and
lodging expenses, the same are not subject to service tax. In this respect, the
assessee may be required to provide documentary evidence substantiating his
claim.
6. Another point raised is to whether in cases where the bills raised by the
service provider are revised, the service tax is payable on the billed amount or on
the actual amount received. In this regard it is clarified that Rule 6 of the Service
Tax Rules, 1994, provides for payment of service tax only on the amount received
and not on the amount raised for the services provided. As such service tax is
payable on the amount actually received.