Insurers are, however, waiting for the finance ministry to clarify on certain points of the service tax.
"We will not charge service tax from policy holders this fiscal," LIC chairman R N Bhardwaj said, adding it would be adjusted in the commission that is paid to agents.
He declined to give any figure of the total outgo that LIC was contemplating from service tax and education cess payment as it could be assessed only after the end of the fiscal year on March 31.
An official of ING Vysya also confirmed that the new tax could not be charged from consumers due to certain administrative problem.
The service tax, which was extended to risk component of insurance policies in the last budget, will have to be paid by consumer from next fiscal, industry sources said.
There was some ambiguity when the finance minister, P Chidambaram proposed service tax on risk premium in Budget for 2004-05.
Later, Central Board of Excise and Customs came up with a notification that gives an option of 10 per cent service tax on the annual premium or one per cent of total premium.
Insurance industry sources said the cost of buying an insurance product would become higher next fiscal as all insurers would incorporate the service tax into the premium charged from consumers.