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Final Project ON SERVICE TAX

Final Project ON SERVICE TAX

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Published by devashree

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Published by: devashree on Mar 27, 2010
Copyright:Attribution Non-commercial


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The tax reforms committee headed by Dr.Raja.J.Chelliah recognized therevenue potential of the service sector in India and recommended imposition of service tax on select services. Based on these recommendations Dr. Manmohan Singh,the Union Finance Minister, in his budget speech for the year1994-1995 introducedthe new concept of service tax. Service tax is being proposed on fifteen individuallyspecified services and the scope of certain existing services is being extended or clarified. Subsequent Finance Acts have added more and more services to be taxed for service tax purpose. As such today 107 services are chargeable to service tax.
It is prime responsibility of the Government to fulfil the increasingdevelopmental needs of the country and its people, by the way of public expenditure.Government’s primary sources of revenue are direct and indirect taxes. Revenuereceipts from customs and Excise duties are on the decline due to World TradeOrganisation (WTO) commitments and rationalization of commodity duties.While the largest component of GDP in the country comes from the ServiceSector, its contribution to the national treasury had been insignificant. With theincrease in income , increasing portion of such incomes is spent on the consumptionof services like entertainment, travel and tourism, etc. Though there exist varioustaxes or duties like Union Excise Duties, VAT, Sales Tax, Entry Tax, or Octroi Duty,etc by Central or State Government, most of the services are not directly subject totaxation. Thus production and consumption of services, which constitute a largegrowing portion of the economy, contribute very little by way of taxation. Extendingthe tax to the service sector was not only to ensure neutrality and horizontal equity in
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taxation but also to broaden the tax base and improve revenue productivity of taxsystem.
When Insurance business was nationalized only life insurance corporation of India (L.I.C) and General Insurance Corporation of India (G.I.C) and its subsidiarieswere allowed to do business. But with the opening up of the insurance sector for  private participants like ICICI, HDFC, UTI etc the potential for generation of businesshas increased . This has also increased the dependence on intermediaries (or agents)for generation of business.
is a method of spreading over a large number of persons , a possiblefinancial loss , which can not be borne by an individual.As per sec 65(58),
means any person carrying on general insurance business or life insurance business in India.
is any individual who takes the insurance policy from the insurancecompany. He is the one whose risk is covered by the insured.
Insurance Agent
provides services to the insurance company in relation to themarketing of insurance policies and provides services to the policy holder by givinginformation on types of insurance policy, document processing and remitting of insurance premium.
Policy Holder
includes a person to whom the whole of the insurable interest of the policy holder in the policy is assigned once and for all is full and absolute but doesnot include an assignee.
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Under sec 65 (55)
of the act , the term
Insurance auxiliary services
meansany service provided by an actuary, an intermediary or insurance intermediary or aninsurance agent in relation to general insurance business or life insurance business andincludes risk assessment, claim settlement, survey and loss assessment.
means an Actuary possessing required qualifications and must be a person possessing a license/registration under the Insurance Act / InsuranceRegulatory Development Authority Act (IRDA).
Intermediary or Insurance Intermediary
mean the person connected withthe following business Insurance broker, reinsurance broker, insurance consultants,surveyors and loss assessors.
Insurance Broker
is a person between a company and insured and who solicits business for the company from the public.
Insurance Consultants
are advisors who advice their client on the nature typeand various other aspects of insurance policy.
are brokers who are engaged in the business of reinsurance. Wherean insurance company in order to cover their risk re-insures themselves with another insurance company, which is called re-insurance.
assess the loss suffered by the insured.
Loss Assessors
make assessments of the loss suffered by the insured andsubmit there report to the insurance company.The term
will generally include not only natural person but artificial persons like partnership firm, HUF, corporate bodies, association or body of individual , charitable institutions , government undertaking, co-operative societies etc
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