Service Tax on health Care services in the budget 2011

The Union Budget proposal to levy 5% service tax on health care services has been severely criticised by the medical community, which has described it as a "misery tax". The community says the proposal to tax health care adds to the concerns of the common man, and it has demanded that it be scrapped.

Dr Devi Prasad Shetty, chairman of Narayana Hrudayalaya, has in an open letter addressed to the aam aadmi, said, "This is not a 'service tax', it is a 'misery tax' since the government wants to make money out of your misery. Please do not think that only rich people will be taxed since the proposal says only air-conditioned hospitals need to pay the tax. No surgery, simple or complex, can be performed without an air-conditioned operation theatre. Legally, a blood bank cannot get a licence without air-conditioning. CT, MRI and catheterization labs do not function without air-conditioning. Simply put, hospitals cannot function without air-conditioning!"

The medical fraternity has called on people to observe 12th March as "Misery Day", to protest against the proposed service tax and demand that it be rolled back.

Presenting the Union Budget for 2011-12 last week, finance minister Pranab Mukherjee proposed a 5% service tax on medical services, including diagnostics, provided at centrally air-conditioned clinical establishments, having more than 25 beds for in-patient treatment. The service tax is to be levied also on services provided by consultant doctors operating from such hospitals.

 A Press Trust of India report quoted Mr. S Dutt Majumder, chairman, Central Board of Excise and Customs (CBEC), as saying that "as far as the CBEC is concerned, we think health services will also have to be brought under the (tax net) and it should not affect the common man. We are talking about central air-conditioning, not air-conditioning. And even private hospitals (with) central air- conditioning and more than 25 beds will be covered."

Further, the government has indicated that it will reconsider the imposition of service tax on health care and re-examine other contentious tax proposals announced in the Union Budget 2011-12 . "Since the presentation of the Budget 2011-12 , I have received several suggestions and representations , including feedback from Members (MPs) on taxation proposals. These are under examination ," Finance Minister Mr. Pranab Mukherjee said during discussions on the Budget in Lok Sabha on Friday.

Source: The economic times