New Delhi, Apr 10: Industry chamber FICCI on Thursday asked the Finance Ministry to modify the budget proposal to impose Service Tax on the Unit Linked Insurance Policy (ULIP) products by limiting the levy of tax to only fund management charges.

Finance Minister P Chidambaram, in his budget, has proposed to impose Service Tax on entire range of charges on ULIP schemes, which according to FICCI, would widen the disparity between ULIP and mutual funds resulting in "unfair and unintended discrimination".

The service tax on Ulip should be levied in the same manner as in case of mutual funds, it said, adding "this would truly bring parity between mutual funds and ULIPs in respect of application of Service Tax."

At present, Service Tax on mutual funds is levied on asset management charge, while the charges on ULIP products do not attract Service Tax.

The budget proposal, if implemented, would make ULIP products unviable and slow down growth of the life insurance industry, besides placing the life insurance industry at a disadvantageous position within the financial services sector, FICCI said.

It said that in case of ULIP, the Service Tax should be levied be on fund management charge which is comparable to the asset management charge paid by mutual funds to asset management companies.