S.t. on excess receipt of insurance premium

Save Share

This query is : Resolved

chirag shah (Querist)

17 July 2012 we have agencies of various insurance companies.

we received insurance premium from our sub agents on behalf of insurance company and issued policy.

on receipt of those premium amounts we pay 70% premium to the insurance company. out of remaining 30% -
1) 15% give to sub agents as commission
2) 15% gain

i want to know----
whether we have any service tax liability because we providing service to the sub agents.......??????

Suresh Mittal

Suresh Mittal (Expert)

17 July 2012 First of all, in my opinion, you are providing service to Insurance company and not to sub-agents. I assume that the receipts issued by insurance company is of 100% amount and not of 70%. If it is so, then you are being paid by insurance company and not by any one else.
If above facts are correct, then your service is subject to revese charge, so you are not liable to pay Service Tax. In this case service tax is to be paid by insurance companies.

Message likes : 1 times

chirag shah

chirag shah (Querist)

18 July 2012 Thank you very miuch sir...

But the receipts issued by insurance company is of 70% only...

i think as per insurance auxillary service, we charging extra 30% amount and liable to service tax...is this true...???

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

22 July 2025 Thanks for the clarification!

Here’s how it works:

You collect 100% premium from sub-agents/customers on behalf of the insurance company.

Out of this, you pay 70% to the insurance company.

The remaining 30% is your commission and gain (15% to sub-agents as commission + 15% your margin).

Key points regarding Service Tax:
Service you provide:
You provide Insurance Auxiliary Service to the insurance company, not to sub-agents. The entire premium (100%) is collected on behalf of the insurance company.

Receipts issued by Insurance Company:
If the insurance company issues receipt only for 70% (the amount they actually receive), that is fine. You are considered an agent for the insurance company for the full premium amount.

Tax liability under Reverse Charge:
Under service tax law, Insurance Auxiliary Services provided by an agent to an insurance company are subject to reverse charge. That means the insurance company is liable to pay service tax, not you.

Your 30% margin (commission + gain):
This is your consideration for providing the agency service. Since you are an agent of the insurance company, the service tax liability is on the insurance company under reverse charge, not on your commission or gain portion.

Summary:
You do not have a direct service tax liability on the 30% margin.

The insurance company will pay service tax on the insurance auxiliary service under reverse charge mechanism.

Your role is to provide services as an agent to the insurance company, and you do not charge service tax to sub-agents or customers.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now