EXEMPTION TO SERVICES BY REGULATORY BODIES

[Dr. Sanjiv Agarwal]

Mega exemption Notification No. 25/2012-ST dated 20.06.2012 contains exemptions under Service Tax. Recently a host of exemptions have been added to the list of exemptions vide Notification No. 9/2016-ST dated 1.3.2016 and Notification No. 22/2016-ST 13.04.2016. These, inter alia, include grant of exemption to services provided by regulatory organizations / bodies such as Employees Provident Fund Organization (EPFO), Insurance Regulatory and Development Authority of India (IRDA) and Securities and Exchange Board of India (SEBI). These exemptions are discussed briefly hereunder:

Services provided by Employers Provident Fund Organization 

Service provided by Employees Provident Fund Organization (EPFO) to persons covered under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 are exempt from levy of Service Tax w.e.f. 1.4.2016 vide Notification No. 9/2016-ST dated 1.3.2016. Since all services provided by the Government are taxable w.e.f. 1.4.2016, this specific exemption has been provided. (Entry No. 49)

EPFO manages the subscriptions of provident fund of employees and its investment. Such services shall be exempt. The objective of the EPFO is extend social security benefits to the working class in the form of Provident Fund, Pension and Insurance benefits. The broad functions of EPFO are as under:

• Enforcement of provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952;
• Recovery and management of money held in Trust; and
• Providing satisfactory service to the members of Schemes.

It also runs employees provident fund schemes which are administered by Central Board of Trustees which also include employees person scheme, employees deposit linked insurance scheme. EPFO may recover amounts including interest from employers.

Services provided by Insurance Regulatory & Development Authority

Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (IRDA Act) are exempt from Service Tax w.e.f. 1.4.2016 vide Notification No. 9/2016-ST dated 1.3.2016. (Entry No. 50)

 IRDA is regulatory body for the development and regulation of insurance activities in India. Services provided by IRDA to the insurers shall be exempt. IRDA's powers and functions include –

• issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; 
• protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; 
• specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents
• specifying the code of conduct for surveyors and loss assessors; 
• promoting efficiency in the conduct of insurance business; 
• promoting and regulating professional organisations connected with the insurance and re-insurance business; 
• levying fees and other charges for carrying out the purposes of this Act; 
• calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;
• control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938); 
• specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries; 
• regulating investment of funds by insurance companies; 
• regulating maintenance of margin of solvency; 
• adjudication of disputes between insurers and intermediaries or insurance intermediaries; 
• supervising the functioning of the Tariff Advisory Committee; 
• specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f); 
• specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and 
• exercising such other powers as may be prescribed

IRDA may receive Government grants, fees and charges, besides percentage of prescribed premium income from the insurer. All such incomes or sums shall be exempt from levy of Service Tax.

Services provided by Securities and Exchange Board of India

Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market are exempt from levy of service tax w.e.f. 1.4.2016 vide Notification No. 9/2016-ST dated 1.3.2016. (Entry No. 51)

SEBI is a regulatory body responsible for development and regulation of securities market in India. It provides services to various stock exchanges, intermediaries, issuers and investors. SEBI registers various market intermediaries and levies fees or other charges. It also imposes monetary penalties for various contraventions. It also regulates stock exchanges in the country. All incomes by way of fees, charges etc collected by SEBI shall be exempt from levy of Service Tax.