S TAX DEDUCTION

[SHASHIKANT DIXIT]

DEAR SIR

I WOULD LIKE TO KNOW THAT WHAT IS PROCESS OF SERVICE TAX DEDUCTION FROM THE IA COMMISSION PAID BY SBI LIFE INSURANCE CO LTD. IF THERE ARE ANY LEGAL ISSUE FOR THIS DEDUCTION THAEN PLEASE TELL MAY THIS DEDUCTION BE REFUNDED BY CONCERN DEPARTMENT.

[vidhi bansal]

Sir.... At first i would like to inform you that payment of insurance commission covered under reverse charge mechanism. so as per law  at the time of payment of commission, SBI LIFE INSURANCE Co ltd. will deduct the amount of service tax at the rate of 12.36 percent and pay to the central government. and net amount to be paid to insurance agent.

[Mahir S]

Yes, the liability to pay service tax will be on the Insurer and not on commission agent.

Refer Rule 2 (1) (d) (i) (A) of Service Tax Rules, 1994.

No refund is available from the department for the service tax paid by insurance company for the commission paid to agent.

 

 

AI Summary

Reverse charge liability for service tax on insurer commission payments requires insurer to remit tax and cannot be refunded. Commission payments to insurance agents are subject to the reverse charge mechanism, so the insurer, not the agent, must deduct and remit the applicable service tax at the time of payment, remit it to the central government, and pay the net amount to the agent; no departmental refund is available for such tax paid by the insurer.