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Hospital bills may escape tax

If you were worried over the budget move to tax services provided by hospitals with more than 25 beds, hold on. HT reports.

business Updated: Mar 03, 2011 01:06 IST
HT Correspondent

If you were worried over the budget move to tax services provided by hospitals with more than 25 beds, hold on.

The government on Wednesday hinted at the possibility of the proposal being rolled back and said the Centre was willing to discuss the issue.

"We can discuss 25-bedded hospitals with central air-conditioning... we can discuss whether a person who has malaria and needs to go for blood test, whether he should pay service tax for that diagnostic or not," Sunil Mitra, revenue secretary told reporters. Service tax on healthcare basically applies to high-end treatment, he added.

Finance minister Pranab Mukherjee had said in his budget proposal for 2011-12 that service tax on health check-ups will be replaced with a tax on all services provided by hospitals with 25 or more beds and having central air-conditioning, with an abatement of 5%. Government hospitals were kept outside this tax net.

Several services are being brought under the tax ambit as a mode of preparation for the proposed Goods and Services Tax (GST) scheduled to be rolled out next year. The new system will subsume all indirect taxes. "We are moving towards GST, which will have a comprehensive negative list. There should not be any apprehension," Mitra said.

Admitting that healthcare spending in the country as a percentage of GDP (gross domestic product) is still low compared to other emerging economies, Mukherjee had earlier said that healthcare and education remain priority sectors for the government. Health is a state subject and the Centre would hold discussions on the issue with state governments, the finance minister had said.

Healthcare spending is slated to increase in the 12th Plan, which would be rolled out by the Planning Commission next year.