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Urgent-plz reply........

CA Shashi (Industry) (60 Points)

12 January 2012

hello freinds,

plz can anybody tell me in case of tpa's when did income from service fees recognised in books.As the company is receiving payment from insurer in delay of 3-4 months and now company is liable to pay service tax on accrual basis. If the income is recognised on basis of poilcy date, the company is liable to pay service tax from it's own pocket due to which it's effects the workiong capital of the company........

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6 Replies

CA Sai Kumar (CA) (93 Points)
Replied 12 January 2012

Yes Sashi. As per the new rules, since service tax is payable on accrual basis, it is irrelevant whether the co., is able to collect service tax. It has to bear from it's own pocket.

CA Shashi (Industry) (60 Points)
Replied 12 January 2012

Originally posted by : Sai Kumar
	Yes Sashi. As per the new rules, since service tax is payable on accrual basis, it is irrelevant whether the co., is able to collect service tax. It has to bear from it's own pocket.

but co said it is not recognised income till receive the payment from the party.

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 13 January 2012

Recognition of income by the service provider is not relevant for determinig the piont of taxation under the amended Point of Taxation Rules. Rule 3 on determination of point of taxation has been amended vide Notification 25/2011-ST dated 31.03.2011, and the same is produced below:

"3. Determination of point of taxation.- For the purposes of these rules, unless otherwise provided, ‘point of taxation’ shall be,-

the time when the invoice for the service provided or to be provided is issued:

Provided that where the invoice is not issued within fourteen days of the completion of the provision of the service, the point of taxation shall be date of such completion”.

Hence, Completion of the provision of the service becomes an important factor in determining point of taxation. I think as a Thrid Party Administrator, provision of service should be treated as completed when the claim is processed and payment is made by you to policy holder. As this is the event which makes the insurer liable to pay the amount to the TPA. As far as the delay of 3-4 months is concerned, that has to be borne by TPA only.

CA Shashi (Industry) (60 Points)
Replied 13 January 2012

thanx prabhat, but claim is not processed in all cases while tpa service fees is recd on premium amount of all policies insured by insurer . I wnt to know when did bill raise in books by tpa at the time of payment recd from insurer or at the time when tpa recd policies detail from insurer company for raising bill.

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 14 January 2012

Shashi as mentioned in your reply, service fee is received on premium amount of all policies insured by insurer whether or not the claim is processed. It seems that processing of claims is irrelevant in determination of TPA's fee. Hence, in my opinion service fee, being collected with the premiums, becomes payable as and when TPA receives the policy details from the insurer.

I am not aware of the flow of activities, but as per details provided by you, my opinion is as above. But in any case, Point of Taxation Rules, 2011 will be applicable without any modification.