Health insurance

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Querist : Anonymous

Querist : Anonymous (Querist)

09 March 2015 Service Tax on Health Insurance is not allowed for deduction.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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09 March 2015 http://taxguru.in/income-tax/income-tax-deduction-for-medical-insurance.html

http://www.charteredclub.com/section-80d/

Check out from article from above link.

Querist : Anonymous

Querist : Anonymous (Querist)

09 March 2015 I already read it sir..... But in Act nothing mentioned.....as every body is giving their own opinion..... As I received the certificate of premium plus service tax from the health insurance co.

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Querist : Anonymous

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Asha Kanta Sharma

Asha Kanta Sharma

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27 July 2024 The treatment of service tax on health insurance premiums in the context of input credit and deductions can indeed be confusing, especially with changes in tax laws over time. Below is a detailed explanation of the treatment and relevant provisions related to health insurance premiums and service tax:

### **Service Tax on Health Insurance**

#### **1. Service Tax Deductibility and Input Credit**

- **Before GST Era (Pre-July 1, 2017):**
- Under the service tax regime, service tax on health insurance premiums was not eligible for input credit. This was because the service tax on health insurance was considered as an expense related to personal health and not directly linked to business operations or production of goods/services.
- The specific rule was that input tax credits could only be claimed for services that were used in the course of or in relation to the business. Health insurance premiums generally fell under personal expenses, thus not qualifying for input credit.

- **After GST Era (Post-July 1, 2017):**
- Under GST, the treatment of health insurance premiums is somewhat similar. Health insurance services, as per the GST Act, are not eligible for input tax credit for businesses. The GST on health insurance premiums, whether for group or individual policies, cannot be claimed as input tax credit.

#### **2. Relevant Provisions and Rules**

- **Service Tax Act (Prior to GST):**
- **Rule 2(e) of the Service Tax Rules, 1994:** This rule defined input service and excluded personal insurance services from being classified as input services.

- **GST Act:**
- **Section 17(5) of the CGST Act, 2017:** This section lists the items for which input tax credit is blocked, including health insurance services. The relevant clause specifies that credit of tax paid on insurance services is not allowed except where the insurance is related to the business of providing services or goods.

#### **3. Treatment of Service Tax on Health Insurance Premiums**

- **Business Books:**
- **Non-Deductibility:** Since service tax on health insurance premiums is not eligible for input credit, it should be treated as a non-deductible expense in the business’s financial statements.
- **Expense Classification:** It should be recorded under expenses related to employee benefits or other similar categories in the profit and loss account.

- **In Tax Returns:**
- **Personal Insurance Premiums:** If the health insurance premium is related to personal coverage and not for employees, it should not be included in business expenses for tax purposes.

#### **4. Practical Example**

If a business pays a health insurance premium of ₹50K with a service tax component of ₹5K:

- **Total Premium Paid:** ₹55K (₹50K premium + ₹5K service tax)
- **Accounting Treatment:**
- Record the total amount of ₹55K as an expense in the profit and loss account.
- **No input credit** should be claimed for the service tax component.

### **Conclusion**

While the rules and regulations governing the treatment of service tax on health insurance premiums can seem complex, the key takeaway is that under both the service tax regime and GST, the input credit for service tax on health insurance premiums is not allowed. This treatment aligns with the general principle that personal insurance expenses are not considered business-related inputs.

For further guidance, consult with a tax advisor or a professional accountant who can provide tailored advice based on current regulations and specific circumstances of your business.