ED and CST on Insurance

[Guest]

We  are  a manufacturing Industry.  We  normally   bill  the  machinery  for  the  basic  value +  ED 10.3%  and   CST  2%  against  Form C.

The  Insurance  for  the  machine  is  to  the  account  of  the  buyer.  He  will  arrange  for  the insurance.

Sometimes  it  happens  that  the  buyer  informs  us  to   insure  the  machinery  and  show  the  insurance  cost  in  the    Sale  Invoice.   Now  we  have  a   taken a  open  transit  insurance  policy  because  the no. of  cases  have  increased.   We   show  the  insurance  component  separately  in  the  Sale  Invoice  and  the  ED  10.3% and  CST 2%    is   calculated  on  the  Insurance  also in  the  Sale  Invoice. 

But  we  have  received   complaints  from the  buyers  that  the  duty and  tax  should  not  be  charged  on  the Insurance  component.   Are  we  to  accept  the  customers  words   and  not  charge  duty and tax.

So  clarify to  me  whether  we  should  charge  the  duty and tax    or   should  we  not.

Regards.....

Ramesh Babu R

[YAGAY andSUN]

Excise Duty and CST will not be charged on the Insurance components, if shown separately in the invoice.  Further, you can refer Accurate meter case in this matter, though it pertains to inclusion of freight in the assessable value of the goods but may be useful in this case also.

[Anil Gagneja]

Excise Duty and CST charge on the insurance amount if their is an additional consideration. i.e insurance amount charged by you is greater than the . premium paid by you.

[Guest]

Dear All

 

Insurance component has be suffer ED and Tax 

Becoz Taxes and Duty are charged on  Ass.Value  of goods 

Shivanand

Tax consultant- 9845906798

[Guest]

Dear,

 

As per Rule 5 of the valuation Rules , the cost of insurance is a part of cost of freight. As per Rule 5 Freight is not includible in assessable value for the purpose of excise Duty. Therefore it is not includible.

AI Summary

Insurance charges and indirect taxes: separately invoiced insurance generally excluded unless billed as additional consideration. Whether excise duty and CST apply to a separately invoiced insurance charge: some submissions say separately shown insurance is not taxable; another contends tax applies if the billed insurance is additional consideration exceeding the supplier's premium; an alternative position treats insurance as part of assessable value; valuation guidance treating insurance as freight - and freight being non-includible - supports exclusion from excise and CST.