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Service tax at the rate of 10% has been levied on that portion of the premium of life insurance policies which pertains to risk element, by the Finance Act, 2004 with effect from 10th September, 2004.
In the case of composite policies (risk plus saving) life insurer can at his option pay 1% of the total premium towards discharge of service tax liability. This shall not be applicable in case an insurance policy is towards risk only or where the premium gives details of risk premium and other premium separately.
The Service Sector, which contributes to more than 50% of GDP, has not been contributing much towards the government exchequer, thereby creating pressure on the manufacturing sector. Hence in terms of international practices and reports made by various expert committees, the service tax has to be levied in most comprehensive manner on the service sector also.
Service Tax is levied at the rate of 10% and would not cause much hardship on anyone, moreover Service Tax is an indirect tax, and not a personal tax.
This information was given by Shri S.S. Palanimanickam, Minister of State for Finance in reply to a question raised by Shri Nana Deshmukh in Rajya Sabha today.
BSC/BY/DN-207/05
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