new delhi in order to boost life insurance levying of service tax should be revisited in order to make the product attractive says v philip md ceo bajaj allianz life insurance in his prebudget expectations as life insurance contributes 41 of gdp and also forms a significant chunk of household savings levying of service tax should be revisited in order to make the life insurance product attractive he said v philip lists a few recommendations on service tax and income tax related to life insurance products for union budget 2013 service tax revise service tax on fmc one of the issues that have been recommended earlier as well by life insurers is service tax on fund management charges at present fund management charges fmc are capped at 135 as recommended by irda service tax is charged on this or the actual amount whichever is higher this results in unnecessary payment of tax if the actual fmc is less than 135 especially in the current situation where recent guidelines and competition has forced insurers to reduce fmc hence it is recommended that tax should be charged on the actual amount of the fmc nil service tax on annuity purchase price another aspect where service tax should be relooked at is on annuity purchase price for instance while purchasing an immediate annuity plan a service tax of 309 is charged on the price hence for a customer purchasing annuity worth rs 1 cr the effective purchase price for the customer increases by rs 309000 which is a significant amount considering the reluctance of people towards planning for their retirement through life insurance this service tax may act as a further deterrent for customers review of reverse charge mechanism service tax liability is normally discharged on the provider of the services in case of insurance auxiliary service it is to be paid by the service receiver insurance company under this concept the tax has to be paid on the entire amount without any threshold limit in case of service provider threshold level is defined and is currently at rs 10 lacs we feel that a threshold limit of rs 10 lakh per agent should be considered when the payment is made under the reverse charge by insurance company reduce service tax rate for single premium at present the rate of st is high in case of 1st year and single premium payments in case of traditional products since the chargescost for entire life of policy are embedded in the premium and it is equated premium it is felt that the service tax in case of single and 1st year premium should not be at such high rate and it should be same as for year 2 review of point of taxation service tax is to be paid on the receipt of premium on risk part in many cases the risk portion cannot be determined before underwriting it leads to incorrect estimation and deposition and adjustments it is felt that there should be