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Withdrawal Of Indian Healthcare Tax Welcomed

by Mary Swire, Tax-News.com, Hong Kong

30 March 2011


Following protests from opposition political parties and disapproval from business and industry, India's government has announced the withdrawal of its proposed tax on health-care services.

Pranab Mukherjee, the Finance Minister, said: "We have decided to exempt the new levy in its entirety, both in respect of services provided by hospitals as well as by way of diagnostic tests until the Goods and Services Tax comes into force."

The budget proposal had been to levy a 5% service tax on treatment at air-conditioned private hospitals (with more than 25 beds), however a number of industry bodies including the Federation of Indian Chambers of Commerce (FICCI) and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) had appealed for the tax to be rolled back as they believed it would compromise quality and safety measures.

FICCI had said that air-conditioning is no longer a luxury and is essential for the high-quality treatment of patients today. This is confirmed by the fact that the Indian National Accreditation Board for Hospitals (NABH) does not accredit hospitals without central air-conditioning.

The levy was also extended to diagnostic tests of all kinds, and FICCI believed that this would deter preventive healthcare and inevitably lead to an extra burden on secondary and tertiary treatments.

Commenting on the Finance Minister’s announcement, Dr Narottam Puri, Adviser to the FICCI Health Services Committee and Chairman of NABH, said:

“This will remove an important deterrent in providing quality healthcare services at affordable cost to the patients."

“However, the government must look at ways to keep health care delivery outside the purview of the proposed GST regime. Any new levies imposed as part of the new regime would be detrimental towards the interests of the patients, as 80% of the health expenditure is financed out-of-pocket and would have potentially overwhelming healthcare cost increases unbearable for most of the population. This goes against the objective of providing quality, affordable and accessible healthcare services available to all."

ASSOCHAM’s secretary-general D.S. Rawat was in agreement: “We greatly appreciate the finance minister’s decision to rollback the proposed service tax. This will help quality-oriented healthcare and diagnostics companies to render services to patients at lower costs,” he said.

TAGS: tax | business | India | budget | health care

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