Service Tax

Circular/Instructions/Trade Notices

This Circular has been rescinded by Circular No. 93/4/2007-ST, Dated: May 10, 2007


Service tax on insurance - issues raised by united insurance co. Reg.

M/s United Insurance Co. Ltd. have requested for simplification of the provisions relating to refund claims and to allow them to adjust the refund in the future payments of the tax. They have further requested for permission to adjust the tax whenever premium adjustment as allowed on account of the refund to their regular clients. They have brought to notice the following situations relating to refunds

(i) Pro-rata refund - In this category, the insurance company may choose to cancel the policy midway are in all such cases, the pro-rata refund of the premium for the period not run would be allowed to the policy holder. Likewise, the policy holder also may choose to terminate midway and seek refund on the permission on pro-rata basis

(ii) Provisional Policies - In this category, the amount is fixed on a provisional basis and the premium is finally arrived at. cases leading to either refund or payment of additional premium. This kind of provisional premiums are mere prevalent in Marine Policies and Stock Policies.

(iii) Non-realisation of Amount - In this case, refund will not be actually made, but will be a book adjustment, in the event of a cheque being dishonored at a later date. The Company enters the premium amount once the cheque is received and has to debit the account later when it is learnt that the cheque has been dishonored. They calculate the Service Tax on such premium and pay the same to the Department under Section 68 of the Act. Refund may arise in such cases also.
The estimate approximately 1,25,000 applications for refund on a year. It will be difficult for them to file refund claims each and every time under Section 11-B of the Central Excise & Salt Act, 1944 to the Department.

2. The request of M/s United Insurance Co. Ltd. is under consideration in the Board. You are requested to intimate whether the existing procedures/documentations to deal with bulk disposal of refunds within the framework of Section 11-B of Central Excise & Salt Act, 1944 is sufficient or there is need for provide separate procedures/documentation to deal with them. You are requested to furnish your comments/views alongwith any suggestions for amended formats on the above point to the Board urgently.