Insurers' guile led to healthcare tax, says Govt

 Finance Minister Pranab Mukherjee in Budget 2011-12 proposed levying 5 per cent tax on all services provided by private hospitals having at least 25 beds with central air-conditioning facility and also on all diagnostic tests.

The proposal invited sharp criticism from medical professionals, led by Narayana Hrudayalaya Chief Devi Shetty who termed the levy as “misery tax” and said air-conditioning facility is a must for operation theatres in a hospital.

“How many hospitals in small towns are centrally air-conditioned...the ultimate objective has been that the man who can pay tax, only he would be brought into the net,” Central Board of Excise & Customs (CBEC) Chairman S Dutt said.

Service tax on healthcare was first announced last year, but only on bills settled by insurance companies.

But insurance  companies began asking patients to pay first and get reimbursed later which resulted in low tax collections, he added. “We never thought, and even now we don’t think, that the ‘aam aadmi’ (common man) will be affected by service tax,” he said, emphasising that the tax does not apply if the operation theatres and intensive care units in hospitals are air-conditioned.

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