Regarding service tax on sub-agent
This query is : Resolved
07 January 2016
One of my client gets insurance commission from Main agent who is registered with Insurance Regulatory Authority of India, please tell if he is liable to pay service tax as he does not get commission from main agent. As per my information main agents who get commission need not pay service tax.
07 January 2016
He gets commission from main agent. (Not mentioned by mistake)
08 January 2016
I will request the experts to give a reply
20 July 2025
Here's a clear explanation regarding Service Tax on commission received by sub-agents in insurance business (pre-GST):
Situation Recap:
Your client is a sub-agent.
He receives commission from the main agent (who is registered with IRDAI).
The client does not get commission directly from the insurance company.
You want to know if your client is liable to pay Service Tax.
Service Tax Rules on Insurance Commission (Pre-GST):
Principal service provider: Insurance Company
Insurance companies pay commission to main agents.
The service provided here is “Insurance Auxiliary Services” (a taxable service under Service Tax law).
Main Agents
Main agents receive commission from insurance companies.
They are not liable to pay Service Tax on commission received from insurance companies because this commission is considered income from an exempted service.
Sub-agents
Sub-agents receive commission from main agents (not directly from insurance companies).
Sub-agents provide “commission agent service” to the main agents.
The commission received by sub-agents is taxable under Service Tax as “Commission Agent Service”.
Is the sub-agent liable to pay Service Tax?
Yes, the sub-agent must pay Service Tax on commission received from the main agent.
Because the sub-agent is providing a taxable service to the main agent.
The rate of Service Tax (pre-GST) was around 14% (including cess).
Key Points:
Main agents do not pay Service Tax on commission from insurance companies.
Sub-agents are liable to pay Service Tax on commission received from main agents.
The sub-agent should register for Service Tax if their aggregate turnover exceeds the threshold limit (usually Rs. 10 lakh).
The sub-agent must issue a proper invoice with Service Tax and remit the tax.
Situation Recap:
Your client is a sub-agent.
He receives commission from the main agent (who is registered with IRDAI).
The client does not get commission directly from the insurance company.
You want to know if your client is liable to pay Service Tax.
Service Tax Rules on Insurance Commission (Pre-GST):
Principal service provider: Insurance Company
Insurance companies pay commission to main agents.
The service provided here is “Insurance Auxiliary Services” (a taxable service under Service Tax law).
Main Agents
Main agents receive commission from insurance companies.
They are not liable to pay Service Tax on commission received from insurance companies because this commission is considered income from an exempted service.
Sub-agents
Sub-agents receive commission from main agents (not directly from insurance companies).
Sub-agents provide “commission agent service” to the main agents.
The commission received by sub-agents is taxable under Service Tax as “Commission Agent Service”.
Is the sub-agent liable to pay Service Tax?
Yes, the sub-agent must pay Service Tax on commission received from the main agent.
Because the sub-agent is providing a taxable service to the main agent.
The rate of Service Tax (pre-GST) was around 14% (including cess).
Key Points:
Main agents do not pay Service Tax on commission from insurance companies.
Sub-agents are liable to pay Service Tax on commission received from main agents.
The sub-agent should register for Service Tax if their aggregate turnover exceeds the threshold limit (usually Rs. 10 lakh).
The sub-agent must issue a proper invoice with Service Tax and remit the tax.
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