It is a status quo budget with routine announcements: Insurance sector (Lead)March 16th, 2012 - 7:44 pm ICT by IANS
Chennai, March 16 (IANS) The Indian insurance industry is unanimous that the 2012-13 budget presented by Finance Minister Pranab Mukherjee is status quoist and the hike in service tax to 12 percent would not impact the sector.
Insurance officials are also of the view that Mukherjee’s announcement that the insurance amendment laws would be moved is a routine one.
“The increase in service tax will not impact us and also many other insurers. We net out the service tax - collected on the premium and paid on the services availed. For us the service tax paid is higher than what we collect from our policy holders,” Vibha Padalkar, CFO at HDFC Standard Life Insurance Company Ltd, told IANS over phone from Mumbai.
“For a long time insurers had absorbed the service tax to be paid by their agents. However, many are now passing on the service tax burden on their agents either fully or partially,” R. Krishnamurthy, managing director (Insurance and Financial Services) Watson Wyatt a consulting company, told IANS over phone from Mumbai.
Referring to Mukherjee’s proposal to double the tax free bonds for infrastructure projects to Rs.60,000 crore, life insurance officials held mixed views. Some say the savings that are parked with them will now migrate to the bond market while there are others who say there is nothing to worry.
“People who buy bonds belong to mid-segment who want steady flow of income. The doubling of bond issue would not impact life insurers,” Nandagopal said.
However, all the insurance industry officials to whom IANS spoke to termed Mukherjee’s announcement that the government would move The Insurance Laws (Amendment) Bill, 2008 as routine announcement.
The political situation has not changed for better in favour of the central government to move the bill that provides for increase of foreign direct investment (FDI) in the sector to 49 percent from the current ceiling of 26 percent, officials told IANS not wanting to be named.
Presenting the budget, Mukherjee said the government has received the reports of parliamentary standing committees on finance that looked at The Insurance Laws (Amend) Bil, 2008 and The Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011 and they would be moved during the budget session.
The PFRDA Bill would covert the interim PFRDA into a full fledged authority defining its powers and duties. The interim PFRDA was set up in 2003.
The Insurance Laws (Amendment) Bill enables increase of foreign direct investment (FDI) in Indian insurance companies to 49 percent from the current ceiling of 26 percent. The bill also does away with the provision of Indian promoters of insurance companies to reduce their stake to 26 percent over a period of time.
“From a general insurance perspective there is very little the budget offers. For this sector, we were expecting more reforms especially on the enhancement of the 80D Income tax benefit with a lot more increment for senior citizens as well as removal of service tax for micro-insurance, senior citizen policies and women centric policies,” Amarnath Ananthanarayanan, CEO & MD, Bharti AXA General Insurance, told IANS.
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