KARACHI: The provincial tax authorities have been urged to exclude insurance from taxable services in order to provide incentives to insurance industry.
Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to Sindh Revenue Board (SRB), said that each year, the life/health insurance companies have been approaching the SRB for an exemption, which is granted annually.
The last exemption for life insurance was valid only till June 30, 2019, whereas exemption for Corporate Health Insurance is valid till June 30, 2020 and has not yet been renewed.
The life and health insurance industry is based largely in the province of Sindh, where, the medical sector itself is exempt from SST.
Accordingly, subjecting the corporate health insurance to SST is making it uncompetitive, in Sindh, by adding on to the cost of health insurance.
Discussions are still ongoing with the Chairman SRB, and the Chairperson, Sindh Board of Investment, for exemption on the same.
The OICCI recommended that both, life insurance and health insurance, which do not fall within the scope of definition of service, should be permanently included in the list of exempted services by incorporating the same under table of exempted services specified in SRB’s notification no. SRB 3-4/7/2013 dated June 18, 2013, as per the following:
01. 9813.15: Life Insurance
02. 9813.16: Health insurance, rendered to both, individuals and corporates.
It may be mentioned that in Sindh these are taxable services.
A life insurance/ health policy is not a service. It is an underwriter’s promise to pay to the policy holder ‘in the future’, a specified sum of money, ‘either on occurrence of an identified event or on maturity of the policy’.
Such tax is highly discriminatory as entire health sector itself remains exempt and is not taxed.
This creates a deterrence for insurance business, as a person obtaining insurance would be paying additional 13 percent as well as cost of insurance, compared to directly obtaining health services, where he does not have to pay this tax.
This is clearly discriminatory and in violation of Article 25 of the Constitution of Pakistan.
The assertion that insurance is not a service, has also been legally upheld in USA and the Court there has ruled that life insurance policies are not “services”.
The KP Revenue Authority has exempted life insurance from the purview of taxable services. Uniformity across the country is essential for ease of doing business.
