Govt likely to shelve tax on healthcare-Mar 2, 2011

Govt likely to shelve tax on healthcare

TNN, Mar 2, 2011, 02.47am IST


NEW DELHI: Caught between public outcry and Congress reservations, the government on Tuesday indicated that it was willing to review the Budget proposal to levy a service charge on healthcare costs of individuals. But those opting for medical insurance might have to remain under the ambit of the levy.

''Whether the service tax will be on 25-bed hospitals or whether it will be on all tests is something that can be discussed,'' revenue secretary Sunil Mitra said.

Finance minister Pranab Mukherjee in his Budget proposed to levy 5% service tax on all services provided by centrally air-conditioned clinical establishments with 25 beds. In addition, tests at diagnostic clinics are proposed to be brought under the levy. Consultant doctors would be part of the levy too. Against the 10% service tax levy, Mukherjee had proposed 50% abatement, resulting in a total levy of 5%.

Congress sources indicated the party would urge Mukherjee to withdraw the unpopular proposal that can make the ruling party vulnerable to the opposition's charge of being anti-poor.

Party leaders are sure 25-bed hospitals would pass on the additional burden to patients, thus annoying voters when Congress cannot afford to.

Amid protests from healthcare service providers and those going to private hospitals and diagnostic centres, government officials suggested that the levy would impact only a handful of people who use high-end medical care facilities.

''It is inhuman to put further burden. It is the aam admi who will have to bear the burden. It's cruelty,'' Naresh Trehan, cardiac surgeon and chairman & managing director of Medanta, said during a post-Budget interaction with the finance minister.

Apollo Hospital's Shobana Kamineni too sought a rollback of the ''retrograde step'' given that government spending on healthcare was low, something that Pranab Mukherjee acknowledged.

P N Arora, MD of Yashoda Hospital, argued that government should not make healthcare costlier.

Later, Mitra told TOI that the big impact of the proposal was in case of individuals and hinted that the tax would apply for those using a medical cover whether purchased in their individual capacity or through a corporate tie-up.

Asked if healthcare should be taxed given that several do not have access to medical facilities, Mitra said the government was willing to discuss the issue with the stakeholders. ''If the view is that it should not be taxed, we will look at it,'' he said, adding that a negative list of services, which will not be subjected to a levy under the Goods & Services Tax regime would be prepared.

Congress is concerned that service tax on diagnostics and healthcare may sour the otherwise pleasant post-budget mood. Party leaders feel the provision would directly hit the poor consumers seeking healthcare and argued it would have been better if the tax was levied on super-speciality hospitals which were owned by and cater to the rich.