Drop service tax on Ulip charges: life insurers
Life insurers are continuing to press for a level-playing field with mutual funds.india Updated: Feb 11, 2010 22:04 IST
Life insurers are continuing to press for a level-playing field with mutual funds.
In its budget wishlist, the Life Insurance Council, the association of life insurance companies, has asked the finance ministry to remove service tax anomalies in Unit-Linked Insurance Plans (Ulips) and bring them on par with mutual funds.
The service tax category of ‘management of investment under Ulip service’ was introduced in the Finance Act 2008. All charges such as entry-load, exit-load, switching charges, policy administration charges and other charges were subjected to a service tax of 10 per cent.
“The intention of the (then) Finance Minister was to bring a parity between Ulip and mutual fund, yet when the final proposal came all charges were brought under service tax — including stamp duty collected on insurance policies from policyholders paid to the state government,” said S.B. Mathur, secretary general of the Life Insurance Council.
“(For) asset management companies like mutual funds, service tax is charged only on the fund management fees, and this puts Ulips at a competitive disadvantage,” Mathur said.
The other recommendations by life insurers are to allow them to carry forward their losses for 12 years from the current 8, and creation of a separate limit for long-term saving instruments like life insurance and pensions.