INSURANCE AGENT

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2010 Pl. clarify, whether Insurance agents (LIC/GIC)are covered under service tax, if yes then under what conditions

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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07 February 2010 Yes. Insurance agents are covered under service tax As Service "Insurance Auxiliary services" Sec.65(55)

Insurance agent is employed by the Insurance company to solicit insurance business and receive commission from the Insurance company for services rendered by him

Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2010 Does It mean he has to pay the serv. tax out of commission received from Ins. Co. or he has to raise bill on Ins. Co. for serv. tax. Pl clarify

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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07 February 2010 It dose not mean that, In case of insurance agents As per service tax rules, responsible person paying service tax is the Insurance company who appoints the Insurance agent

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2010 Does it mean Insurance company will be deducting the serv. tax out of commission payable

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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01 August 2024 Yes, insurance agents are covered under service tax regulations, which were in place prior to the introduction of GST. Here’s a detailed explanation:

### **Service Tax for Insurance Agents**

1. **Coverage Under Service Tax:**
- Insurance agents, including those dealing with LIC (Life Insurance Corporation) and GIC (General Insurance Corporation), were covered under the service tax regime.
- They provided services to insurance companies, which fell under the category of "Business Auxiliary Services" or "Insurance Auxiliary Services" as per the service tax law.

2. **Conditions and Responsibilities:**
- **Service Tax Applicability**: Insurance agents were required to pay service tax on the commission received from insurance companies. The service tax was applicable on the commission earned for providing services to the insurance company.
- **Billing**: Agents had to raise bills or invoices to the insurance companies with service tax separately mentioned. The insurance company would then pay the commission along with the service tax amount.

3. **Payment and Deduction of Service Tax:**
- **Agent's Responsibility**: Insurance agents were responsible for paying the service tax out of the commission received. They had to calculate, collect, and deposit the service tax to the government.
- **Billing**: Agents needed to raise invoices including the service tax component to the insurance company. They were responsible for ensuring that the service tax was correctly accounted for and paid.
- **Deduction by Insurance Companies**: Insurance companies typically did not deduct service tax from the commission payable. Instead, the agent had to account for and pay the service tax on their own.

### **Transition to GST:**

With the introduction of GST from July 1, 2017, the service tax regime was replaced. Here’s how GST impacts insurance agents:

1. **GST Applicability**: Insurance agents are now required to comply with GST regulations. They must charge GST on their commission and follow the GST compliance requirements.

2. **GST Registration**: Insurance agents must obtain GST registration as per Section 24 of the CGST Act if they are providing taxable services.

3. **Billing and GST Payment**: Agents must issue GST-compliant invoices for the commission received and pay GST accordingly. The process involves:
- Charging GST on the commission earned.
- Paying the collected GST to the government.
- Filing periodic GST returns.

4. **No Deduction by Insurance Companies**: Similar to service tax, insurance companies do not deduct GST from the commission payable. Insurance agents are responsible for handling GST on their commission.

### **Summary:**

- **Under Service Tax**: Insurance agents were responsible for paying service tax on the commission earned, and they had to bill the insurance company including the service tax.
- **Under GST**: Insurance agents must now charge GST on their commission, pay it to the government, and comply with GST regulations.

For detailed and personalized advice, consulting a tax professional or GST consultant is recommended.

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