Servicetax applicability on insurance sub brokers
This query is : Resolved
25 October 2012
What are the relevant legal requirements for service tax applicability on ibsurance sub brokers
MOHAMMAD SALIM
(Expert)
26 October 2012
Service by insurance agents to person carrying on insurance business i.e. ins co only covered under reverse charge. Accordingly in case of sub brokers , if thier turnover is exceeding 10 lacs , they need to charge service tax and deposit the same...
26 October 2012
Dear mr salim
thanks for the reply...but there is one issue...some banks pay the service tax and others donot...thts the practical aspect of trade...in this case wht shall be the relief for the sub brokers?
thanks for the reply...but there is one issue...some banks pay the service tax and others donot...thts the practical aspect of trade...in this case wht shall be the relief for the sub brokers?
25 July 2025
Hey! On service tax applicability for **insurance sub-brokers**, here’s a quick summary:
### Key points:
1. **Service tax on insurance agents** (including sub-brokers) is usually **liable to be paid by the person carrying on insurance business** (i.e., the insurance company) under **reverse charge mechanism (RCM)**.
* So, **insurance companies pay service tax on commission paid to agents and sub-brokers**.
2. **Sub-brokers themselves do not charge service tax to insurance companies**. They simply earn commission from insurance companies, and the insurance companies pay service tax on that commission under RCM.
3. However, if sub-brokers provide services to any other entity or person (not the insurance company), and if their **turnover exceeds Rs. 10 lakh**, then **they must register and charge service tax on such services**.
---
### Practical issues:
* Some banks or insurance companies might pay service tax under reverse charge; others might not, causing confusion or cash flow issues for sub-brokers.
* Unfortunately, there is no specific “relief” for sub-brokers if insurance companies fail to discharge service tax liability under RCM.
* Sub-brokers should maintain proper documentation and can advise their clients (insurance companies) about their legal obligations to pay service tax under RCM.
---
### Summary:
* Sub-brokers **do not charge** service tax to insurance companies.
* Insurance companies pay service tax under RCM on commissions paid to sub-brokers.
* Sub-brokers need to register and pay service tax **only if providing other taxable services beyond insurance broking** and turnover exceeds Rs. 10 lakh.
---
If you want, I can help draft an explanation or letter that sub-brokers can share with banks/insurance companies about their RCM obligations. Want me to?
### Key points:
1. **Service tax on insurance agents** (including sub-brokers) is usually **liable to be paid by the person carrying on insurance business** (i.e., the insurance company) under **reverse charge mechanism (RCM)**.
* So, **insurance companies pay service tax on commission paid to agents and sub-brokers**.
2. **Sub-brokers themselves do not charge service tax to insurance companies**. They simply earn commission from insurance companies, and the insurance companies pay service tax on that commission under RCM.
3. However, if sub-brokers provide services to any other entity or person (not the insurance company), and if their **turnover exceeds Rs. 10 lakh**, then **they must register and charge service tax on such services**.
---
### Practical issues:
* Some banks or insurance companies might pay service tax under reverse charge; others might not, causing confusion or cash flow issues for sub-brokers.
* Unfortunately, there is no specific “relief” for sub-brokers if insurance companies fail to discharge service tax liability under RCM.
* Sub-brokers should maintain proper documentation and can advise their clients (insurance companies) about their legal obligations to pay service tax under RCM.
---
### Summary:
* Sub-brokers **do not charge** service tax to insurance companies.
* Insurance companies pay service tax under RCM on commissions paid to sub-brokers.
* Sub-brokers need to register and pay service tax **only if providing other taxable services beyond insurance broking** and turnover exceeds Rs. 10 lakh.
---
If you want, I can help draft an explanation or letter that sub-brokers can share with banks/insurance companies about their RCM obligations. Want me to?
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