New Delhi: LIC policyholders may not have to pay the Service Tax at least this year, as the public-sector insurance company could absorb the additional tax burden.

"It looks pretty difficult to pass on the Service Tax burden to consumers this fiscal," Life Insurance Corporation chairman S B Mathur said on the sidelines of a FICCI (Federation of Indian Chambers of Commerce and Industry) seminar in New Delhi today (Oct 18, 2004).

LIC is working out the net burden of the 10 per cent Service Tax and 2 per cent Education Cess on the risk premium and the impact on the price of its products.

"If there is a significant net burden, it may be transferred to policyholders... If it is not substantial, it may be absorbed by LIC," Mathur said.

The Finance Minister P Chidambaram had turned down the plea of the insurance industry seeking exemption of insurance premium from the service tax.

The Finance Ministry, however, has given an option for insurance consumers either pay 10.2 per cent on the risk cover or pay 1 per cent of the gross premium.

The service tax proposed in the budget would not only increase the insurance premium for consumers, it would also pose difficulties for insurers in calculating the tax on different consumers having varied risk profile. Most of the private players have decided to hike the premium on account of the service tax.