As per sub-rule (7A) of rule 6 of the Service Tax Rules, 1994, an insurer carrying on life insurance business has an option to pay service tax @ 1% on the gross amount of premium charged to the policy holder, except where the premium paid by the policy holder was only towards the risk cov­er or the part of the premium payable towards risk cover in life insurance was shown separately.

With effect from 1 May 2011, the said sub-rule (7A) of rule 6 of the Service Tax Rules, 1994 has been substituted with the new rule according to which an insurer carrying on life insurance business shall have the option to pay tax:

–   on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service;

–   1.5 % of the gross amount of premium charged from a policy holder in all other cases;

towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the said Finance Act. It is further provided that such option would not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance.

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Notification No.35/2011 – Service Tax, Dated – 25th April, 2011

G.S.R.  (E).- In exercise of the powers conferred by sub-section (1) read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely :-

1.         (1)        These rules may be called the Service Tax (Third Amendment) Rules, 2011.

(2)        They shall come into force on the 1st day of May, 2011.

2.         In rule 6 of the Service Tax Rules, 1994, for sub-rule (7A), the following sub-rule shall be substituted, namely,-

“(7A) An insurer carrying on life insurance business shall have the option to pay tax:

(i) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service;

(ii) 1.5 per cent of the gross amount of premium charged from a policy holder in all other cases;

towards the discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the said Act:

Provided that such option shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance.”.

[F. No. 334/3/ 2011 – TRU]

(Sanjeev Kumar Singh)

Under Secretary to the Government of India

Note.-  The principal rules were notified vide notification no. 2/1994-Service Tax, dated the 28th June, 1994, published in the Gazette of India, Extraordinary vide number G.S.R. 546(E), dated the 28th June, 1994 and last amended vide notification No.26/2011-Service Tax, dated the 31st March, 2011, vide number G.S.R. 184(E), dated the 31st March, 2011.

Corrigendum to Service Tax Notification No. 35/2011-Service Tax, dated the 25th April, 2011

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