No service tax to be imposed on hospitals

The Union government has finally rolled back the amendment in service tax proposed by finance minister Pranab Mukherjee following adverse reactions from experts in the healthcare industry.

While presenting Budget 2011-12, the Union finance minister had proposed that 10% service tax become applicable on 320 new services, including hospitals. In 2010, the service tax was applicable only on 117 areas.

The amendment was termed 'ambiguous, impractical and illogical' by the healthcare industry experts who had unanimously pointed out to the authorities that this would make healthcare more expensive adding to the woes of the common man.

Sources in the healthcare industry have welcomed the step of the authorities to roll back the proposed amendment. Industry experts said that the amendment would have put an unfair burden on patients and 'killed' the growth of the healthcare industry.

Dr Vikram Shah, director, Shalby Hospital, said, "The authorities have taken a good step by deciding to roll back the proposed tax which would have made healthcare expensive."

In the budget, the ambit of service tax was widened to cover some categories of hospitals and diagnostic tests. AC hospitals with more than 25 beds were required to pay service tax.