The point of taxation generally is the date of issuance of the invoice or receipt of payment, whichever is earlier. CBEC, therefore, has clarified that the reminder notices issued by the life insurance companies to policyholders to pay renewal premium, not being invoices issued in terms of Rule 4A of Service Tax Rules, 1994, will not be exigible to service tax.

Circular No.166/1/2013 -ST,  Dated 1st January, 2013

Subject: – Clarification in respect of notices/ reminder letters issued for life insurance policies – regarding.

 It has been represented by life insurance companies that in terms of the practice followed, reminder notices/letters are being issued to the policy holders to pay renewal premiums. Such reminder notices only solicit furtherance of service which if accepted by policy holder by payment of premium results in a service.  Clarification has been desired whether service tax needs to be paid on the basis of such reminders.

3. The matter has been examined. Under the Point of Taxation Rules 2011, the point of taxation generally is the date of issue of invoice or receipt of payment whichever is earlier. The invoice mentioned refers to the invoices as issued under Rule 4A of the Service Tax Rules 1994. No tax point arises on account of such reminders. Thus it is clarified that reminder letters/notices for insurance policies not being invoices would not invite levy of service tax. In case of issuance of any invoice, point of taxation shall accordingly be determined.

4. The above clarification is issued only for life insurance sector.

5. Trade Notice/Public Notice may be issued to the field formations accordingly.

6. Please acknowledge the receipt of this circular. Hindi version to follow.


Technical Officer, TRU

Tel: 011-23092037

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