Charging of S.Tax on earning through LIC

[Guest]

Sir,

I have a policy of 25 Lac for maintenance of my factory assets(machinery) and also paying premium.Before the policy expired I incurred loss to assets and received compensation as per insurance terms from insurer to the tune of 8 lacs. The service tax deptt. is claiming service tax on this income as business income. Please guide.Regards,Pradip.

[SHIVKUMAR SHARMA]

Mr.Pradip

In my opinion,Service tax is not applicable on this income because you are not providing any service 

SHIVKUMAR SHARMA

[PAWAN KUMAR]

Dear Sir,

As per my view, service tax would not be leviable on such compensatory claim received as this is not a case of providing the service.

[Mahir S]

Department contention appears to be right as compensation in form of insurance is received due to loss made on the assets.

Making any gain/profit on any activity (other than manufacturing activity) and relating to business is nothing but business income.

[YAGAY andSUN]

Dear All,

This is an interesting issue.

In addition to above replies, please also check the Negative list, Mega exemption notification and relevant judgments in this regard to dig out the appropriate answer.

Regards,

Team YAGAY & SUN

(Indirect Tax Consultants)

[chandresh lathigara]

Even if they want charge st u can opt as ssi

AI Summary

Is Service Tax Applicable on Insurance Compensation for Factory Asset Losses? Explore Views & Legal Exemptions. A forum participant sought advice on whether service tax is applicable on compensation received from an insurance policy for factory asset losses. Several respondents shared their views: one argued that service tax is not applicable as no service was provided; another agreed, stating the compensatory claim does not constitute a service. However, a third suggested the compensation could be considered business income, thus subject to tax. Another response recommended reviewing the Negative List, Mega Exemption notifications, and relevant judgments for clarity. Lastly, a suggestion was made to consider Small Scale Industry (SSI) exemption if applicable.