The government has withdrawn the 5% service tax — dubbed ‘misery tax’ — on healthcare chains proposed in last month’s Union Budget.
Under pressure from various quarters, the government also clarified in Parliament on Tuesday that the duty was to pave the way for implementing the goods and service tax (GST), and not to mop up revenues for the exchequer.
Finance minister Pranab Mukherjee said while initiating the debate on the Finance Bill: “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 the GST comes into force.”
Parliament, the corporate world and markets greeted the decision. Shares of Fortis Healthcare rose by 2.23% while Apollo Hospitals saw its stock prices go up by 0.52%.
Prathap C Reddy, chairman of the Apollo group, said, “This is a welcome decision by the finance minister. Access for all to the highest standards of healthcare has been the driving force for all of us who constitute the sector. The tax would have been a huge deterrent.”
FM also provided some relief to readymade garment manufacturers by raising the rate of abatement (tax relief) on some branded garments and textile made-ups. Earlier, the budget proposed a 10% excise duty on readymade garments, a move that was widely opposed . “I propose to enhance the abatement of 40% to 55% on retail sale prices,” he said. “With this relief, a unit will continue to be eligible for SSI exemption in 2011-12 even if it had a turnover of R8.9 crore based on retail sale price in the current year.”