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SERVICE TAX AMENDMENT IN FINANCE ACT, 2025

Dr. Sanjiv Agarwal
Reinsurance exemption permits refund of service tax collected during specified historical period; refund claims must be filed within statutory time. A retrospective exemption bars levy or collection of service tax on reinsurance services provided under the Weather Based Crop Insurance Scheme and the Modified National Agricultural Insurance Scheme for the period 1 April 2011 to 30 June 2017, overriding prior section 66/66B provisions. Refunds are mandated for tax collected that would not have been payable under the exemption, with refund claims to be filed within six months from the date the Finance Bill, 2025 receives Presidential assent; the previously omitted chapter is treated as if in force for refund purposes. (AI Summary)

Change in Service Tax Law

Finance Act, 2025 has been enacted as Act No. 7 of 2025 vide Gazette dated 29.03.2025. Vide Section 135, a special provision has been inserted w.e.f. from 01.04.2011 and upto 30.06.2017. This provision is a special provision for retrospective exemption from service tax in certain cases relating to reinsurance services provided by insurance companies under Weather Based Crop Insurance Scheme and Modified National Agricultural Insurance Scheme.

It reads as under:

“135. (1) Notwithstanding anything contained in section 66 of Chapter V of the Finance Act, 1994, as it stood prior to the 1st day of July, 2012, or in section 66B of the said Chapter of the said Act, as it stood prior to the omission of the said Chapter vide section 173 of the Central Goods and Services Tax Act, 2017, no service tax shall be levied or collected in respect of taxable services provided or agreed to be provided by insurance companies by way of reinsurance under the Weather Based Crop Insurance Scheme and the Modified National Agricultural Insurance Scheme during the period commencing from the 1st day of April, 2011 and ending with the 30th day of June, 2017 (both days inclusive).

(2) Refund shall be made of all such service tax which has been collected, but which would not have been so collected, had sub-section (1) been in force at all material times:

Provided that an application for the claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2025 receives the assent of the President.

(3) Notwithstanding the omission of the said Chapter, the provisions of the said Chapter shall apply for refund under this section retrospectively as if the said Chapter had been in force at all material times.”

Accordingly,

  1. Exemption has been provided from Service Tax in certain cases relating to reinsurance services provided by insurance companies under ‘weather based crop insurance scheme’ and ‘modified national agricultural insurance scheme’.
  2. The amendment shall override Section 66 and 66B of the Finance Act, 1994 as it existed prior to 01.07.2012 and 01.07.2017 respectively.
  3. No service tax shall be levied or collected in respect of taxable services provided or agreed to be provided by insurance companies by way of reinsurance under the Weather Based Crop Insurance Scheme and the Modified National Agricultural Insurance Scheme.
  4. The period of exemption shall be 01.04.2011 to 30.06.2017.
  5. Refund shall be allowed of all such services which has been collected but court not have been so collected due to this amendment.
  6. Refund application, if any, shall be made within 6 months of enactment of Finance Act, 2025 (i.e. from 29.03.2025).
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