Service tax on medicare draws flak

The world's only ‘misery tax' is how an audibly livid Dr Devi Shetty, Chief Executive of Narayana Hrudayalaya, described what works out to be a five per cent tax on services at air-conditioned hospitals, and diagnostic centres.

Come April, consumers will have to fork out more for hospital bills and health check-ups. No thanks to the “absurd” move in Budget 2011-12 to set right an anomaly between those covered by health insurance and those who pay for their healthcare expenses. Also, by bringing diagnostic services into the service tax bracket, the Finance Minister seems to have let small unorganised labs off the hook while accredited pathology labs have to pay more, said industry representatives, seeking a roll-back on this disincentive.

The Government is trying to cash in on people's illness with this move, Dr Shetty, leading cardiac surgeon whose hospital receives 600 heart surgery cases a month, said.

“This is the lowest any Government can stoop. It is cashing in on people's misery, and this from a Government that itself does not spend much on its people's healthcare. Eighty per cent of patients in the country pay healthcare bills out of pocket and the number of insured is minuscule. A heart surgery done for around Rs 1 lakh takes away another Rs 5,000.” He decried the air-conditioner criterion saying critical surgeries such as kidney transplants, joint replacements, brain or heart surgeries needed AC.

Tax rates

The Budget has extended the anomaly instead of reversing the trend, said Mr Deepak Samant, Director (Finance), Hinduja Hospital, Mumbai. Earlier, there was a 10.3 per cent service tax on hospitals for cashless health insurance. The new levy seeks to cover check-ups and diagnostic tests across the board, at about 5 per cent.

Also disappointed is Mr S. C. Nagendra Swamy, President, Manipal Health Enterprises. “Preventive healthcare is important for early detection of communicable diseases. We strongly urge the Minister to revisit the proposal,” he said. The common man will be burdened; primary and secondary healthcare centres should have been exempted, said Dr Vishal Goyal, Chief Operating Officer of BGS Global Hospitals, Bangalore.

Poor and low income group patients who needed private hospital services would surely feel the pinch of this, added Mr Pinaki Bhadury of Frost & Sullivan. When health insurance in the country was low, the hospital tax would result in an increased out-of-pocket spending, she said.

Widening price differentials

The levy on labs would increase the price differential between accredited ones and street-corner labs, said Dr Sanjeev K. Chaudhry, Chief Executive, Super Religare Laboratories Ltd. It defeated the idea of preventive healthcare as path labs were the first line of defence against full-blown diseases.

Thyrocare promoter, Dr A. Velumani, said, of the 65,000 labs in the country, only about 5,000 big labs offering quality service came under the tax net which applies to turnovers exceeding Rs 10 lakh.

In fact, Dr Pervez Ahmed, CEO and MD, Max Healthcare, added that the notion of a ‘service' with respect to hospital services needs to be re-examined.

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