New Delhi, Mar 22 : Bowing to demand from all quarters, Finance Minister Pranab Mukherjee today announced withdrawal of the proposed 5 per cent service tax on airconditioned hospitals with more than 25 beds and on diagonistic services.
He also provided some relief to readymade garment manufacturers by raising the abatement available for levy of taxes on retail price of some branded garments and textile made-ups.
"The purpose of the new levy (healthcare) was not merely to mobilise revenue, but to pave the way for introduction of the GST."However, 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 GST comes into force", Mukherjee said while moving the Finance Bill in the Lok Sabha for consideration and passage.
The announcement was greeted with loud thumping of desks by members as the Minister hoped that it will no more be called "misery tax".
Both these proposals, mooted by the Minister as part of the budget for 2011-12 on February 28, had evoked sharp reaction from the interest groups.
During the general discussion on the Budget last week,almost all political parties wanted the Finance Minister to withdraw the healthcare service tax proposal, which was dubbed as "misery tax".
The garment traders had criticised the proposed 10 per cent excise duty on readymade garments saying it would hurt the small business.
"To address this concern, I propose to enhance the abatement of 40 per cent to 55 per cent on the retail sale price. With this relief a unit will continue to be eligible for SSI exemption in 2011-12 even if it had a turnover based on retail sale price of Rs 8.9 crore in the current year", the Minister said.
Private healthcare chains and diagnostics labs today welcomed the government's decision saying it will help patients.
"It is a good thing that it has been rolled back. For the patients who were required to pay more, it has come out as a good news," Max Healthcare CEO and Managing Director Pervez Ahmed told PTI.
Expressing similar sentiments, Narayana Hrudayalaya Chairman Devi Shetty said: "I am happy that the Finance Minister has decided to roll back the service tax. I met the FM two weeks ago and at that time he was of the view that the tax would hurt the common man and he would like to do something about it."
Welcoming the decision, Apollo Hospitals Group Chairman Prathap C Reddy said: "Now, with this progressive move to repeal the tax, the country will see our renewed efforts to serve the nation and we will relentlessly persevere to keep all Indians in good health."
Access to healthcare for all and that of the highest standards has been the driving force for the healthcare sector in India and imposition of this service tax would have been a huge deterrent to this vision, he added.
While presenting the Budget 2011-12, Finance Minister Pranab Mukherjee proposed to impose 5 per cent service tax on treatment in private hospitals, paid either by individuals, insurance companies or firms.
Under the proposal, all services provided by hospitals with 25 or more beds that have the facility of central air-conditioning were to be covered under service tax.
He had said that the move was aimed at preventing differential treatment between persons who make payments themselves and others where payments were made by an insurance firm or a business entity.
It was, however, criticised severely by different quarters and was even dubbed "misery tax". In the wake of the demand to rollback the proposal, Mukherjee today announced in the Lok Sabha that the step is being withdrawn.
"We greatly appreciate the decision of the Finance Minister to rollback the proposed service tax. This will help quality-oriented healthcare and diagnostics companies to render services to patients at lower costs," Super Religare Laboratories CEO Sanjeev K Chaudhry said.
Expressing similar sentiments, Dr Lals Pathlabs CEO Om Manchanda said: "It is a great news. We welcome the decision." PTI
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