Monday 5 January 2015

Service Tax on Postal Life Insurance premium from 01.01.2015

The PLI Directorate of India Post has decided to collect the Service Tax on insurance premium from all PLI and RPLI policy holders w.e.f. 01/01/2015.  The circular in which recovery of service tax from individual policy holders was stopped from 1/11/2007 and was decided to meet the liability on Service Tax from the PLI/RPLI fund.  

Later the case was re-examined  in the light of ever increasing out-go  from the PLI Fund I RPLI Fund,  IRDA guidelines issued to indicate separately the amount of premium and service tax collected from individual policy holder and also collection of service tax  by LIC and other insurance companies from their policy holders. 

The Service Tax @ 3.09% (Including education and higher education cess) of the gross premium during the first year and @ 1.545%  (Including education and higher  education cess) on subsequent years i.e., second year onwards (rounded off to nearest rupee) is to be collected from the Policy Holders separately and a consolidated receipt issued for the total amount i.e. premium+ service tax.

The service tax is to be collected every time the premium is collected, be it monthly, quarterly, half yearly or annually at the rates cited above.   Insurant who pay the premium in the form of cheque (s) should be advised to include the service tax component also at the above prescribed rate in the value of the cheque.

It should collect the above mentioned service tax and show the same separately in the receipts issued to the PLI/RPLI policy holders.   At the end of the day, the PO records should indicate, the premium collected and service tax collected separately in all their   accounts and consolidated accordingly.  In all the returns to Postal Accounts Offices and DPLI Kolkata pertaining to PLI and RPLI these two components should be correctly reflected to facilitate amount collected and amount depicted in departmental accounts and further book adjustment with the Service Tax Department.                                                      

PTC Mysore is also being advised to make necessary changes in the Meghdoot software and NIC Delhi in the respective module of its software.

All Drawing and Disbursing Offices who deduct the premium from the salary of their employees should also add the Sales Tax component and recover the same every month and indicate in all their records.  DAP Offices and DPLI Kolkata will reflect the collections under respective heads.

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