CLARIFICATION IN RESPECT OF NOTICES/REMINDER LETTER ISSUED FOR LIFE INSURANCE POLICIES

TRADE NOTICE NO. 901/01/2013/ST [F.NO.IV(16)30-105/STC/TECH./2013/NAGPUR], DATED 20-2-2013

Authority: – Circular No.166/1/2013-ST, dated 1-1-2013 issued by Technical Officer TRU, New Delhi.

It has been represented by life insurance companies that in terms of the practice followed, reminder notices/letters are being issued to the policyholders to pay renewal premiums. Such reminder notices only solicit furtherance of service which if accepted by policyholder 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.

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 invoices mentioned refer 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.

The above clarification is issued only for life insurance sector.

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