02 March 2011

Premium healthcare to be costlier with new service tax, the total sum of the hospital bill including the cost of medicines and consumables will increase by 10%

Finance minister Pranab Mukherjee proposed amendments in service tax and extended it more areas. Earlier, 117 segments were under service tax, now the unchanged rate of 10% tax on services will be levied on 320 more which is amajor concern for the hospitals coming up in the country.
The amendment has been termed 'ambiguous, impractical and illogical' by experts in the healthcare industry as it will make healthcare all the more costlier than it is today.
As per amendments in the budget, service tax has been widened to cover some categories of hospitals and diagnostic tests. AC hospitals with more than 25 beds have been brought under the ambit of service tax. Healthcare industry experts have termed this as an 'improper' step.
Dr Milan Chag, a leading cardiologist and managing director of The Heart Care Clinic and Care Institute of Medical Sciences, said,
"The imposition of new service tax for treatment in any air-conditioned hospital with a bed capacity of more than 25 means adding 10% to patients' total hospital bill. This is illogical and improper. Ultimately, the end consumers, i.e. patients, suffer as this will automatically raise their bill by 10%," said Chag.
In most cases, of the total bill, 50-70% cost is of medicines and consumables and these cannot be defined as 'services'. However, with this additional new tax, the total sum of the hospital bill including the cost of medicines and consumables will increase by 10% which is an unfair hike, explained Dr Praful Pawar, CEO, Apollo Hospitals.
Industry sources say that the finance minister needs to think hard on this proposed amendment. The government must modify it and exclude medicines and consumables from the total bill, say healthcare industry experts.
Pankaj Patel, chairman and managing director, Zydus Cadila, said, "Overall, the budget is a stability-oriented one with thrust on infrastructure and allocations for healthcare sector.However, the new service tax would hamper the growth of the healthcare industry."
Echoing a similar view, Dr Vikram Shah, director, Shalby Hospital said, "This proposed new tax would burden the patients. And to avoid the increase in the costs, the healthcare service providers would not prefer to fall under the organised sector. This amendment if not modified would kill the growing segment of healthcare industry."
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