TaxTMI 
TaxTMI 
Is an insurer correct in deducting 6.18% service tax from insurance commission paid to its Agents.
Rate of service tax on insurance commission
15 Jan 2009 
2 Replies 
18309 Views Asked by
Service tax on insurance commission: collection treated as insurer's obligation, so insurers may deduct from agent commissions.
Whether insurers may deduct statutory levy from agent commission turns on allocation and collection of service tax liability. One view sees the liability with insurers but says contractual terms govern whether insurers may withhold tax. The contrary view treats agent commissions as cum service tax and allows insurers to deduct tax at source, while insurers may claim cenvat credit on input services, prompting agents to seek higher commission or protest. (AI Summary)
Whether insurers may deduct statutory levy from agent commission turns on allocation and collection of service tax liability. One view sees the liability with insurers but says contractual terms govern whether insurers may withhold tax. The contrary view treats agent commissions as cum service tax and allows insurers to deduct tax at source, while insurers may claim cenvat credit on input services, prompting agents to seek higher commission or protest. (AI Summary)