Service tax on insurance commission received
This query is : Resolved
04 September 2014
Dear All,
I am Purchasing Travel Insurance Policy from Reliance agent for Rs 100/- and collecting Rs 100/- from my Customer. Below is the details of how i am doing Invoicing in my Book of Accounts
Debtors A/c ......Dr 100/-
to Reliance Vendor A/c ...... Cr 100/-
But I am getting Rs 30/- as commission from Insurance company. so at the time of making payment i am paying cash of RS 70/- to my insurance Agent and deducting Rs 30/- from policy amount of RS 100/-.
Should i pass the below JV and pay service Tax .
Reliance Vendor A/c.....Dr 30/-
To Insurance Commission A/c..... Cr 26.70/-
To Service Tax A/c ..............Cr 3.30/-
Please check the above JV and let me know the correct way of doing the above transaction.
I am Purchasing Travel Insurance Policy from Reliance agent for Rs 100/- and collecting Rs 100/- from my Customer. Below is the details of how i am doing Invoicing in my Book of Accounts
Debtors A/c ......Dr 100/-
to Reliance Vendor A/c ...... Cr 100/-
But I am getting Rs 30/- as commission from Insurance company. so at the time of making payment i am paying cash of RS 70/- to my insurance Agent and deducting Rs 30/- from policy amount of RS 100/-.
Should i pass the below JV and pay service Tax .
Reliance Vendor A/c.....Dr 30/-
To Insurance Commission A/c..... Cr 26.70/-
To Service Tax A/c ..............Cr 3.30/-
Please check the above JV and let me know the correct way of doing the above transaction.
16 September 2014
Dear All,
Please Help
Please Help
25 September 2014
Dear All,
Please Help for above query.
Please Help for above query.
16 October 2014
Need your advice on above Querry
24 July 2025
Thanks for sharing the details! Let's break this down:
---
### Situation Summary:
* You collect **Rs.100** from the customer for travel insurance.
* You pay **Rs.70** cash to the insurance agent (Reliance vendor).
* You get **Rs.30 commission** from the insurance company.
* You want to record service tax on the commission received (Rs.30).
---
### Key points about **Service Tax on Insurance Commission**:
1. **Commission earned on insurance services** is a **taxable service** under the category of "Insurance Auxiliary Services" or "Commission or Brokerage services."
2. You are **liable to pay service tax on the commission amount received (Rs.30)**, not on the total amount collected (Rs.100).
3. The **service tax rate** applicable (as per 2014 rules) on commission is 10.3% (service tax + cess). (Check if it's 12.36% or 10.3% depending on the period).
---
### Your Journal Voucher (JV):
| Entry | Debit (Dr) | Credit (Cr) |
| --------------------------- | ---------- | ----------- |
| Reliance Vendor A/c | 30 | |
| To Insurance Commission A/c | | 26.70 |
| To Service Tax A/c | | 3.30 |
This looks like you are trying to record:
* Rs.30 commission received (credit to commission account)
* Service tax liability on Rs.30 commission (Rs.3.30)
* Reducing vendor payable account by Rs.30
---
### Correct approach should be:
Since you pay Rs.70 cash to Reliance vendor, and net Rs.30 commission is your income, your accounts should show:
1. **Record total amount collected from customer:**
```
Debtors A/c Dr 100
To Reliance Vendor (liability) Cr 100
```
2. **Record payment to vendor:**
```
Reliance Vendor A/c Dr 70
To Cash/Bank Cr 70
```
3. **Record commission income and service tax liability:**
```
Reliance Vendor A/c Dr 30 (reduce liability to vendor by commission)
To Insurance Commission Income Cr 26.70
To Service Tax Payable Cr 3.30
```
---
### Explanation:
* You initially owe Rs.100 to vendor.
* You pay Rs.70 in cash.
* Vendor owes you commission Rs.30 (so your liability to vendor reduces by Rs.30).
* You recognize Rs.26.70 as commission income.
* You recognize Rs.3.30 as service tax liability on commission.
---
### Important:
* You must **pay service tax on commission amount (Rs.30)** to the government.
* File service tax returns accordingly.
* The **service tax component is collected and paid by you** as service provider of commission service.
---
If you want, I can help prepare a more detailed accounting example or entries specific to your accounting software. Would that help?
---
### Situation Summary:
* You collect **Rs.100** from the customer for travel insurance.
* You pay **Rs.70** cash to the insurance agent (Reliance vendor).
* You get **Rs.30 commission** from the insurance company.
* You want to record service tax on the commission received (Rs.30).
---
### Key points about **Service Tax on Insurance Commission**:
1. **Commission earned on insurance services** is a **taxable service** under the category of "Insurance Auxiliary Services" or "Commission or Brokerage services."
2. You are **liable to pay service tax on the commission amount received (Rs.30)**, not on the total amount collected (Rs.100).
3. The **service tax rate** applicable (as per 2014 rules) on commission is 10.3% (service tax + cess). (Check if it's 12.36% or 10.3% depending on the period).
---
### Your Journal Voucher (JV):
| Entry | Debit (Dr) | Credit (Cr) |
| --------------------------- | ---------- | ----------- |
| Reliance Vendor A/c | 30 | |
| To Insurance Commission A/c | | 26.70 |
| To Service Tax A/c | | 3.30 |
This looks like you are trying to record:
* Rs.30 commission received (credit to commission account)
* Service tax liability on Rs.30 commission (Rs.3.30)
* Reducing vendor payable account by Rs.30
---
### Correct approach should be:
Since you pay Rs.70 cash to Reliance vendor, and net Rs.30 commission is your income, your accounts should show:
1. **Record total amount collected from customer:**
```
Debtors A/c Dr 100
To Reliance Vendor (liability) Cr 100
```
2. **Record payment to vendor:**
```
Reliance Vendor A/c Dr 70
To Cash/Bank Cr 70
```
3. **Record commission income and service tax liability:**
```
Reliance Vendor A/c Dr 30 (reduce liability to vendor by commission)
To Insurance Commission Income Cr 26.70
To Service Tax Payable Cr 3.30
```
---
### Explanation:
* You initially owe Rs.100 to vendor.
* You pay Rs.70 in cash.
* Vendor owes you commission Rs.30 (so your liability to vendor reduces by Rs.30).
* You recognize Rs.26.70 as commission income.
* You recognize Rs.3.30 as service tax liability on commission.
---
### Important:
* You must **pay service tax on commission amount (Rs.30)** to the government.
* File service tax returns accordingly.
* The **service tax component is collected and paid by you** as service provider of commission service.
---
If you want, I can help prepare a more detailed accounting example or entries specific to your accounting software. Would that help?
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