In what could be a major relief to policy holders, LIC and other insurers are likely to absorb the 10% service tax and 2% education cess at least in the current fiscal.Insurers are, however, waiting for the finance ministry to clarify certain points on the tax."We will not charge service tax from policy holders this fiscal," LIC chairman R N Bhardwaj said, adding it would be adjusted in the commission paid to agents.He declined to give any figure of the total outgo that LIC was expecting from the service tax and education cess as it could be assessed only after the end of the fiscal year on March 31.An official of ING Vysya also confirmed that the new tax could not be charged from consumers due to certain administrative problems.Service tax, which was extended to the risk component of the insurance policies in the last budget, will have to be paid by consumers from next fiscal, industry sources said.There has been some ambiguity after the finance minister proposed service tax on risk premium in the budget for 2004-05. Later, the Central Board of Excise and Customs came up with a notification that gives an option of 10% service tax on the annual premium or 1% of total premium.Insurance industry sources said the cost of buying a insurance product would go up next fiscal as all insurers would incorporate the service tax into the premium charged from consumers.
