Liability of service tax on brokerage

[V Sithapathy Sithapathy]

We are life insurance brokers. We receive brokerage from life insurance companies and bill the service tax over and above the brokerage. What is the law. Who should pay the service tax.

[Guest]

In your case of insurance agency business, the relevant life insurance company receiving the service is liable to pay service tax. Ref - Sec.68(2)of Finance Act,1994 read with Rule 2(1)(d)(iii) of Service tax Rules,1994.

[Surender Gupta]

As per rule 2(d)(iii) of the Service Tax Rules, in case of Insurance Agent, the insurance company shall be liable to pay service tax. Insurance agents are not liable to pay service tax. However, this provision is not applicable to persons who are not insurance agents.

AI Summary

Insurance company liability for service tax on brokerage: insurers, not agents, bear the tax obligation. Liability for service tax on life insurance brokerage is placed on the insurance company receiving the service; bona fide insurance agents are not liable to pay service tax, though persons who do not qualify as insurance agents fall outside this exclusion and may have different obligations.