The life insurance industry wants service tax on fund management charges to be withdrawn, as is the case with mutual funds. The Life Insurance Council-the representative body of life insurers-will shortly make a presentation to the finance ministry urging the introduction of a uniform taxation platform for the life insurance sector.
Confirming the development, Life Insurance Council secretary general SB Mathur said: “The life insurance industry paid a total service tax of about Rs 4,000 crore last year under various heads, including fund management charges as well as agent commission. We want a uniform tax structure on all similar financial products.
For example, at present asset management companies do not pay any service tax on fund management fees but the insurance industry pays 10.3 percent service tax.”
Max New York Life director (finance) & chief financial officer Sunil Kakkar said: “Insurers also pay service tax on mortality charges as well as auditors’ fees. But the major difference lies in payment of service tax on fund management between unit-linked products and mutual funds.
Although service tax on mortality charges can be passed on to customers, the tax on fund management cannot be passed on in entirety.”
Interestingly, the cap on charges of unit-linked insurance plans has come into force from January 1. The Insurance Regulatory & Development Authority (Irda) has capped fund management charges at 1.35 percent for all tenures. Rationalisation in the commission structure is also expected with more than 200 insurance products being refiled to comply with the new cap announced by the insurance sector watchdog.
The Life Insurance Council is also trying to asses the impact of the proposed goods and services tax (GST) on insurance products. Although details are not out yet, the council feels components like central and state GST may complicate matters.
