Frequently Asked Questions related to Insurance Sector Related on Goods & Services Tax (GST) released by CBIC (Updated as on 27.12.2018)
GST ON INSURANCE SECTOR
Q.1 Whether commission paid to insurance agents shall be construed as supplies received under Section 9(3) of CGST Act, 2017? If yes, whether the Life Insurance Company can raise a consolidated invoice for such commission payments?
Ans: Sr. No. 7 of notification No. 13/2017-Central Tax (Rate),
dated 28th June, 2017 as amended covers supplies received from
Insurance Agents and provides for the Insurance Company to pay GST on such
supplies under Section 9(3) of the CGST Act, 2017. In such cases, the insurance
company may issue agent-wise consolidated invoice at the end of the month for
the supply of services received during the month.
Q.2 Will the requirements of Letter of Undertaking or Bond be required
to be complied with in the case of Life Insurance Premium where the
conditions of export of services are satisfied before or at the time of supply
of the Life Insurance Service?
Ans: Yes. As per Section 16(3) of the IGST Act, 2017, read with Rule
96A of the CGST Rules, 2017, an exporter is required to submit a Letter of
Undertaking or Bond in case the export of service is made without payment of
integrated tax.
Q.3 Can the input tax credit of Krishi Kalyan Cess be carried forward?
Ans: No. It is not permitted in terms of section 140(1) of the CGST
Act, 2017 read with Rule 117(1) of the CGST Rules, 2017.
Q.4 What would be the time of supply of life insurance services?
Ans: Insurance policies are contracts for indemnifying any loss
suffered by the policyholder. The policyholder is required to pay a premium at
the time of inception of the policy. Renewal premiums are required to be paid
on periodical basis during the tenure of the policy. For renewal of the
policies the policyholders are allowed grace period ranging from 15 days to 30
days in accordance with the IRDA (Protection of Policyholders’ Interests)
Regulation, 2002.
The time of supply of life insurance services to the policy holders
would be as under:-
(a) New Policy – At the time of issuance of the policy;
(b) Renewal of Policy – The time of issuance of renewal notice for
insurance premium;
(c) Other charges including ULIP charges – At the time of levy or
recovery of the charges from the policyholder.
Q.5 When service tax was paid on or before 30th June, 2017 for the
services to be provided, but subsequently not provided, whether refund claim
can be made under Section 142(5) of the CGST Act?
Ans: Section 142(5) of the CGST Act, 2017 specifically provides for
refund of tax paid under the Finance Act, 1994 in respect of services not
provided. The same shall be disposed off in accordance with the provisions of
the Chapter V of the Finance Act, 1994.
Q.6 In the case of group insurance policies, a Master Policy is
issued; the beneficiaries of the Master Policy may be located in more
than one State. In such cases, what will be the place of supply of services?
Ans: In the case of issuance of Master / Group Policy to a registered
person where the premium charged is a single premium and not segregated based
on the beneficiaries of the insurance policies, the place of supply for such
policy will be the location of the registered person paying the premium.
Q.7 What is the location of the supplier of service for fund management
charges in ULIP policies?
Ans: The fund management charges are charges towards managing and
administering the fund. These funds are managed by the Fund Management team.
The location of the supplier of service for fund management charges shall be
the location / office which manages the fund.
Q.8 What is the time of supply of services for deposits and advances in
cases of the recipient issuing a bank guarantee or making a deposit before
assumption of risk and issuance of a policy?
Ans: As per the proviso to Section 2(31) of the CGST Act, 2017, a
deposit given in respect of the supply of goods or services or both shall not
be considered as payment made for such supply unless the supplier applies such
deposit as consideration for the said supply. In case of advances, however, the
time of supply is the time of receipt of advance as provided in section 13(2)(a)
of the CGST Act, 2017.
Q.9 Whether ITC will be allowed on motor garage services used by
insurance company for claim settlement?
Ans: Yes, ITC will be allowed on services of motor garage used by an
insurance company for claim settlement.
Q.10 What is the location of the supplier of service for fund management
charges in ULIP policies?
Ans: The fund management charges are charges towards managing and
administering the fund. These funds are managed by the Fund Management team.
The location of the supplier of service for fund management charges shall be
the location / office which manages the fund.
Q.11 Whether the service provided by the re-insurance company to an
insurer will be treated as a supply?
Ans: The service of re-insurance falls within the scope of supply, and
is chargeable to GST.
If you want to make your career in GST then you may
register into IIGST’s course to get complete theoretical and practical
understanding of the law. IIGST provide recorded and live classes to student
and help you to become GST Practitioner.
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