Finance Minister Yashwant Sinhas proposal to levy a 5-per cent
service tax on life insurance premium and also on services
provided to a policyholder or insurer by an intermediary is
domestic private life insurers major concern now.
"It is taxing
savings and will impact our business," says Max New York Life
Insurance CEO and managing director Tony Singh.
Though Sinha had made the
announcement that the government has not clarified about how or on
what the tax will be applied, it should be noted that the premium
paid by a policyholder has several components like contribution to
mortality, savings and insurer overheads, private life insurers
say. Similarly life insurers make a distinction between the
renewal policy and the first-year premium.
The government, they add,
did not specify on what component of the premium the tax would be
applied to whether only on the first year premium
or on the insurers total premium income. Similarly, it is not
clear whether the tax will have to be paid on the whole premium or
on the mortality component.
"We are not
agreeable even for restricting the tax just on the first-year
premium," says Singh. "I any country if such a tax is
levied, policyholders can offset the same under different
provisions of tax laws a facility that is conspicuous by its
absence in India."