Insurance companies to pay service tax for services like registration and renewal
02 January 2014
Insurance industry players would need to pay service tax to Insurance Regulatory Development Authority (IRDA) for provision of services such as registration and renewal.
According to an IRDA notification, the regulator is required to collect service tax from its insurance companies, brokers and agents.
TPAs, insurance repositories, web aggregators, referral entities and surveyors would also be required to pay tax for availing services like grant of registration, licences, renewals and so on, the IRDA said.
Service receivers would be required to add service tax component, as applicable, to the fee while making remittances to the authority from 1 January, it added.
The IRDA board approved the proposals at its meeting held yesterday. However, it did not disclose the rate of service tax applicable to individual categories.
Currently, the rate of service tax is 12 per cent.
Life insurance policyholders pay service tax at the rate of 3 per cent for the first year premium, while for subsequent years the rate is 1.5 per cent.
Meanwhile, life insurance companies sold 25.7 per cent of new policies in 2012-13 in the rural sector. The IRDA said in its annual report for 2012-13 that all the 23 private sector life insurance companies fulfilled their rural sector obligations.
As per IRDA rules, these insurers would need to underwrite 25 per cent policies in the rural sector.
According to the IRDA report, Life Insurance Corporation of India (LIC) was compliant with its obligations in the rural sector, writing a higher percentage of policies (25.44 per cent of new policies) in rural sector than the prescribed 25 per cent for 2012-13.
In the rural sector, life insurers had underwritten 11.3 million policies out of 44.1 million new policies underwritten by them in 2012-13, with LIC underwriting 25.44 per cent of the new policies and private insurers underwriting 26.99 per cent of their new policies in the rural sector.
The authority frames regulations on the obligations of the insurers towards rural and social sector that stipulate targets to be fulfilled by insurers on an annual basis.
According to the IRDA, as regards social sector obligations, among the 23 private life insurers, 22 insurers had fulfilled their social sector obligations during 2012-13, adding that Sahara Life Insurance could not achieve their stipulated target in the social sector.