Pranab withdraws ‘misery tax’ on healthcare (Lead)

March 22nd, 2011 - 9:10 pm ICT by IANS  

Pranab Mukherjee New Delhi, March 22 (IANS) Faced with criticism from the opposition and the medical fraternity, Finance Minister Pranab Mukherjee Tuesday rolled back the proposed five percent service tax, dubbed a “misery tax”, on healthcare he announced while presenting the budget for 2011-12. The move was widely welcomed by the healthcare industry and the common man.

“I 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 GST (Goods and Services Tax) comes into force,” Mukherjee said in the Lok Sabha.

In the budget for 2011-12, the finance minister had proposed to levy five percent tax on services provided by hospitals with 25 or more beds that are centraly air-conditionedand on diagnostic tests of all kinds.

“The purpose of the new levy was not merely to mobilise revenue it was to pave the way for introduction of Goods and Services Tax,” Mukherjee said while initiating debate on the Finance Bill 2011 in the lower house of parliament.

The medical fraternity, the union health ministry and opposition had been demanding a roll-back of the levy, saying it would make healthcare unaffordable for people with low incomes.

During the general discussion on the budget, most lawmakers had criticised the proposed levy - termed a “misery tax” by the medical fraternity.

The medical fraternity as well as industry associations welcomed the minister’s move to withdraw the levy.

“Access to healthcare to all and that of highest standards has been the driving force for all of us who constitute healthcare sector in India and imposition of this service tax would have been a huge deterrent to this vision,” said Prathap C. Reddy, founder and Chairman of Apollo Hospitals Group.

“Now with this progressive move to repeal the tax, the country will see our renewed efforts to serve the nation and we will relentlessly persevere to keep all Indians in good health,” he said.

Welcoming the move, Narottam Puri, adviser, FICCI Health Services Committee, said: “This will remove an important deterrent in providing quality healthcare services at affordable cost to the patients.”

The Federation of Indian Chambers of Commerce and Industry (FICCI) demanded that healthcare services should be kept 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 percent of the health expenditure is financed out-of-pocket and would have potentially overwhelming healthcare cost increases unbearable for most of the population,” said Puri, who is also chairman of National Accreditation Board for Hospital and Healthcare Providers.

“This goes against the objective of providing quality, affordable and accessible healthcare services available to all,” he said.

Renowned cardiac surgeon from Bangalore-based Narayana Hrudayalaya group of hospitals Devi Shetty termed the move “a victory for the common man”.

“It’s a great victory for the aam aadmi. I had told the finance minister that the hike will have an impact on the poor people who are borrowing money even for basic health care,” Shetty told reporters here.

The decision was also welcomed by the public.

“Private hospitals would have only increased the cost of treatment…to incur the cost from the patient. This was much needed,” said Ambika Goswami, a government employee.

“Government hospitals are always packed, one cannot think of depending on them in the hour of crisis,” added Goswami.

“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,” said D.S. Rawat, Secretary General of Associated Chambers of Commerce and Industry.

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