We will revisit service tax on healthcare: FM

Confident of keeping fiscal deficit at 4.6%

We will revisit service tax on healthcare: FM

“I will respond to tax related issues including the proposed tax on health care services when the Finance Bill will come up for discussion,” he told the Upper House while replying to three-day long discussion on the Budget for 2011-12.

“Tax related issues can be announced or decided only at the time of Finance Bill. Therefore I will request those who are agitating to wait till the Finance Bill is being approved by Parliament,” he said in response to volley suggestions made by members on several tax proposals.

In the Budget for 2011-12 Mukherjee has proposed to levy Service Tax on all services provided by hospitals with 25 or more beds that have facility of central air-conditioning. 

The Budget also proposes to bring all sorts of diagnostic tests under the umbrella of Service Tax. Against the 10 per cent Service Tax levy the Budget proposes to extend an abatement of 50 per cent so that the actual burden is kept at 5 per cent of the value of service.

Mukherjee’s proposal to bring healthcare services under the tax net has triggered widespread disappointment. The proposal has also evoked sharp reaction from the medical community which described the service tax on healthcare as “misery tax”.

Earlier dwelling on wide ranging macro-economic issues, Mukhejree while projecting nine per cent growth for the economy in the next fiscal 2011-12, asserted that government would stick to path of fiscal consolidation.

“While our objective is to put the economy on trajectory of higher growth we will enhance our focus on fiscal consolidation without hampering the growth momentum,” he said.

Brushing aside doubts being expressed over government’s projection of  modest rise in expenditure, Mukherjee said the government would be able to keep the fiscal deficit—the net difference between expenditure and income—at 4.6 per cent of Gross Domestic Product (GDP).

“We will be able to keep fiscal deficit at low level through measures like prudent expenditure management and higher buoyancy in revenue collection,” he said. In this context he said the government was hopeful of raising Tax GDP ratio to 12 to 14 per cent from existing 10 per cent.

“We will be giving more emphasis on raising the buoyancy of direct tax collection as it is non-inflationary in nature,” Mukherjee said adding the share of direct taxes in overall tax revenue had been growing over the years.

The share of direct taxes in overall tax revenue stood at 60 per cent during 2009-10. Dwelling on the issue of inflation, Mukherjee admitted price rise was one of the most important and serious concerns facing the country.

Pointing out that rise in inflation was driven primarily due to supply  constraints on various fronts, he said government was taking long term measures to remove supply constraints facing agro products.

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