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Insurance premium: CBR clarification

Sohail Sarfraz

Islamabad: In response to queries from Insurance Association of Pakistan (IAP), the Central Board of Revenue (CBR) has clarified that amount in excess of 3 percent of the premium will be exempted from the central excise duty (CED).

The TAP had asked the CBR whether administrative surcharge is included in the amount of premium paid to the insurance companies for the purpose of levy of the CED.

The CBR has consulted with the Law and Justice Division and ruled that any amount in excess of 3 percent of the premium will be exempted from the CED as mentioned in SRO. 456 (I)/96.

The CBR has further said interpretation of the word "premium" should be made with maximum care keeping in view the relevant provisions of the Insurance Act of Pakistan and prevailing practices in the field.

SRO 456 of 96, reads as that the services provided or rendered on goods insurance and other insurance is subject to 3 percent of the premium paid.

There is no central excise duty on services provided or rendered in respect of life insurance.