S.Tax on Insurance premium paid by Dealer on behalf of us?
This query is : Resolved
11 May 2010
Will there be any Service Tax component on Insurance premium paid to Insurance Co. by a Motor Car Dealer on behalf of us?
11 May 2010
The service tax component in the insurance premium will be paid by the dealer to the insurance co and will be reimbursed by you. No double service tax.
12 May 2010
Will we be able to take S.Tax Input credit?
22 July 2025
This is a good practical query. Let's break it down:
🔹 Scenario:
A motor car dealer pays insurance premium on your behalf to the insurance company (as part of vehicle purchase).
That premium includes service tax (pre-GST era).
You reimburse the dealer for the insurance premium.
🔸 Q: Is there service tax on this reimbursement?
✅ No double service tax applies.
The insurance company charges service tax on the premium.
The dealer just collects and remits this amount — it's a pass-through.
No separate service tax is payable on the reimbursement to the dealer.
🔸 Q: Can you take Input Credit of Service Tax on Insurance Premium?
✅ Yes, but with conditions:
You can claim CENVAT credit of service tax on the insurance premium if:
The invoice is in your name, and
The insurance is for business assets or purposes, not personal use, and
The premium has service tax separately shown, and
You are registered under service tax or excise laws (pre-GST), and eligible to take CENVAT credit.
⚠️ If Insurance is for Personal Use (e.g., car for director):
🚫 No CENVAT credit is allowed — as it's not in the course or furtherance of business.
💡 Practical Tip:
Ask the dealer to provide a copy of the insurance policy showing:
Your name
Premium amount
Service tax charged by insurance company
This becomes your support for claiming input credit.
🔹 Scenario:
A motor car dealer pays insurance premium on your behalf to the insurance company (as part of vehicle purchase).
That premium includes service tax (pre-GST era).
You reimburse the dealer for the insurance premium.
🔸 Q: Is there service tax on this reimbursement?
✅ No double service tax applies.
The insurance company charges service tax on the premium.
The dealer just collects and remits this amount — it's a pass-through.
No separate service tax is payable on the reimbursement to the dealer.
🔸 Q: Can you take Input Credit of Service Tax on Insurance Premium?
✅ Yes, but with conditions:
You can claim CENVAT credit of service tax on the insurance premium if:
The invoice is in your name, and
The insurance is for business assets or purposes, not personal use, and
The premium has service tax separately shown, and
You are registered under service tax or excise laws (pre-GST), and eligible to take CENVAT credit.
⚠️ If Insurance is for Personal Use (e.g., car for director):
🚫 No CENVAT credit is allowed — as it's not in the course or furtherance of business.
💡 Practical Tip:
Ask the dealer to provide a copy of the insurance policy showing:
Your name
Premium amount
Service tax charged by insurance company
This becomes your support for claiming input credit.
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