Citizens' Issues
Experts suspect “misery tax” could return through GST door

Medical fraternity happy over rollback of service tax on healthcare, but thinks it could be introduced in another form next year

Finance minister Pranab Mukherjee on Tuesday announced a rollback of the proposed 5% service tax on healthcare that was opposed by the medical fraternity who chose to call it the "misery tax". But experts feel that this may be a temporary respite and that the "sword of the service tax on healthcare" will continue to hang, and could well come back in the form of Goods and Service Tax (GST), expected to be implemented next year.

Deepak Samant, director finance, D Hinduja National Hospital and Medical Research Centre, told Moneylife, "The government has withdrawn the service tax only till the GST is rolled out next year. In all probability, it is likely to slap the tax in the form of GST next year. The government, which is already besieged by many scams and is facing elections in many states, probably does not want another controversy at this time. It could possibly be a temporary retreat. We should not prematurely rejoice."

Rolling back the service tax, Mr Mukherjee said, "The proposed levy on healthcare has raised considerable anxiety in this House and outside. The purpose of the levy was not merely to mobilise revenue. It was to pave the way for the introduction of the Goods and Service Tax (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."

The service tax on healthcare, which was proposed in the Union Budget, suffered a backlash, with protests against the extra charge, given the escalating cost of healthcare.

Mumbai-based social activist and chartered account Nagesh Kini said, "The finance minister has not ruled out levying the tax by another name like GST, as and when it comes through. The GST Bill, it must be remembered, has been swinging back and forth in the face of opposition by non-Congress ruled states. This is a classic case of the left hand taking away what the right hand giveth!"

Dr Devi Prasad Shetty, chairman of Narayana Hrudayalaya, who had coined the term "misery tax", said the rollback was a relief to the common man.

Medical experts stress that the government should give emphasis on building affordable healthcare facilities. They suggest that public-private partnership (PPP) could be one way of taking affordable healthcare to the public at large.

Dr Rekha Bhatkhande, dean of Mumbai-based Shushrusha Hospital, a citizen's co-operative hospital, told Moneylife, "I feel the government is in the process of finding out the best solution for people."

On the subject of affordable medical facilities, Dr Bhatkhande said, "Like PPP, co-operative hospitals could be a third arm to provide affordable medical facilities for all. In the future, it will help us to reach more number of people."

Mr Samant felt that all types of healthcare services should be permanently put on the negative list, once GST is implemented. "Industry bigwigs and social activists should start building public opinion to necessarily include all types of healthcare services (whether covered by insurance or not) in the 'negative' list of services under GST regime on a permanent basis."

When presenting the Union Budget for 2011-12, the finance minister had proposed a 5% service tax on medical services, including diagnostics, provided at centrally air-conditioned clinical establishments, with more than 25 beds for in-patient treatment. The service tax was to be levied also on services provided by consultant doctors operating from such hospitals.




6 years ago

Sir,ref my earlier comments on roll back of service tax which has been done,I am confident that the good sense will prevail on FM and there should be no service tax on hospitalise.Gov is total failure on health and education issues,rathan than Govt must give an incentives to the aforedsaid servives providers.

Rajiv Chawla

6 years ago

With withdrawal of proposed 5% service tax on, even though Hospital Managements may feel elated as of now, they are the net loser. As any business entity covered under VAT or Central Excise or Service Tax would understand, the coverage enables us to recover the Taxes that we pay on our inputs. Each individual or business whether covered under Service Tax/Excise/VAT or not, pays Taxes on inputs (including Tel Bills, Internet, Courier, Transportation, Services, Consultancy, Professional fee, RM etc). So do Hospitals. Infact, Hospitals pay Excise Duties & VAT on many Medicines, Medical Equipments etc. All these taxes that they are paying even now, could be adjusted as CENVAT. The net effect of unabsorbed Taxes or value addition would have hardly been 1.5%. If a hospital is buying Input Services & Goods worth even Rs.1 crore pa (that's bare minimal) they are paying Rs.10.3 lac as Taxes. This could come back through CENVAT. So, 10.3% of input costs on Tax Paid Services & Goods could be reduced. The purpose of Service Tax on healthcare was not to mobilise revenue, but to pave the way for introduction of the GST which is further simplification of adjustment of Taxes on inputs. Good opportunity lost by Hospitals which could easily save more. Managements could even pass on this benefit to patients. And if anyone thinks there's huge paperwork involved, its not true either, in fact, much less than TDS, where every Assessee works for the Govt. free of cost by collecting Taxes & depositing on on behalf of the Govt. and pays huge penalties for mistakes if any. While compliance of Service Tax helps save revenue through CENVAT. The Govt. is not losing any revenue by removing this Service Tax on Hospitals. Rather, Hospital Managements lost this opportunity to avail of CENVAT benefits and prepare for next year's GST. Not surpising though that due to sheer ignorance, it was termed as "misery tax". I would rather term it as "Recovery of Input Tax".

Share prices rise but no clear trend visible: Wednesday Closing Report

After two days of decline the market rallied but it is still in no man's land

The market opened flat with a negative bias, following a weakening trend in Asian markets, on concerns over the effect of high crude prices on the economy. The Sensex opened 16 points lower at 17,972 and the Nifty was down three points at 5,411. The market succumbed to profit booking within 15 minutes of opening, falling to the day's low, the Sensex down 38 points at 17,950 and the Nifty also losing 12 points to 5402.

Buying in select sectors soon helped the indices to erase early losses and pushed them into a higher trajectory. The gains came from banking, healthcare and metal sectors. The indices gained some momentum to breach the psychological 18,000 and 5,400 levels, respectively, then moved sideways.

The market scaled to the intra-day high in the last half an hour, with the Sensex touching 18,218 and the Nifty going up to 5,485. The indices closed trade a tad off these highs. The Sensex ended 218 points higher at 18,206 and the Nifty closed at 5,480, a gain of 66 points. The advance-decline ratio on the National Stock Exchange was 833:550.

Among the broader indices, the BSE Mid-cap index gained 0.92% and the BSE Small-cap index rose 0.65%.

The top sectoral gainers were BSE Realty (up 1.92%), BSE Bankex (up 1.85%), BSE Healthcare (up 1.51%), BSE Metal (up 1.33%) and BSE Oil & Gas (up 1.17%). There were no losers in the sectoral space today.

Cipla (up 4.13%), ICICI Bank (up 3.76%), Jaiprakash Associates (up 3.48%), DLF (up 2.78%) and BHEL (up 2.43%) were the major Sensex gainers. The main losers were Mahindra & Mahindra (down 1.02%), Jindal Steel (down 0.64%), TCS (down 0.45%) and Bajaj Auto (down 0.20%).

Faced with surging raw material costs, Indian carmakers now face three additional serious challenges, including a shortage of key components that could impact their performance this year.

While car makers could pass on the burden of increased input costs to customers, a shortage of components, compounded by the 11th March earthquake and tsunami in Japan and the Reserve Bank of India's (RBI) rate hikes, which could result in higher car loan rates, have made investors jittery about their prospects over the short- to medium-term.

Markets in Asia settled mixed, with the Nikkei 225 closing lower on profit booking, after recent gains, as high radiation levels increased food safety concerns in the country. Stocks in China ended higher, on support from the realty sector and financials, ahead of a slew of closely-watched earnings that kick off later this week. However, the ongoing turmoil in West Asia remains a cause for worry.

The Shanghai Composite surged 1.03%, the Jakarta Composite advanced 1.09%, the KLSE Composite gained 0.19%, the Straits Times rose 0.65% and the Taiwan Weighted climbed 0.44%. On the other hand, the Hang Seng fell 0.14%, the Nikkei tumbled 1.65% and the Seoul Composite shed 0.07%.

Back home, institutional investors-both foreign and domestic-were net buyers in the equities segment on Tuesday. Foreign institutional investors pumped in Rs236.29 crore and inflows by domestic institutional investors stood at Rs96.04 crore.

Offshore services provider Global Offshore Services, formerly known as Garware Offshore Services (up 0.40%), has said that it has bagged a four-year contract in Brazil worth Rs194.5 crore.

The company's large platform supply vessel (PSV), MC Beaucephalus, owned by its subsidiary, Global Offshore Services BV, will be deployed in Brazilian waters for an approximate value of Rs48.6 crore per annum, according to a company statement.

Pharmaceutical major Wockhardt (up 4.64%) has received ad-interim relief from the division bench of the Bombay High Court through a stay on the admission of the winding up petition filed by the trustees to the Foreign Currency Convertible Bonds (FCCBs) issued by the company. The company has agreed to deposit in court Rs115 crore by 3 May 2011, as per direction of the Bombay High Court.

Jet Airways (down 1.46%)-India's premier international airline together with JetLite-has retained its leadership position in the Indian aviation sector with a market share of 26.1%. The airline has also posted a 16th consecutive month of double-digit growth with robust international and domestic passenger traffic in February 2011.

Jet Airways carried 3.81 lakh international revenue paying passengers in February 2011, with an overall seat factor of 81.1%. The airline has carried 8.24 lakh domestic revenue passengers with a seat factor of 76.5%.


IndusInd Bank in race to buy Deutsche Bank’s credit card biz

IndusInd Bank is in the race to buy Deutsche Bank’s credit card business in India and hopes to finalise a deal in the next few weeks

Private sector lender IndusInd Bank is in the race to buy Deutsche Bank's credit card business in India and hopes to finalise a deal in the next few weeks.
IndusInd Bank, along with Axis Bank, Dhanlaxmi Bank and Karnataka Bank, has evinced interest in acquisition of the credit card business of Deutsche Bank, sources said. A deal is likely to be finalised in the next few weeks, sources added.

As a precursor to its entry into the credit card business, IndusInd Bank appointed Anil Ramachandran as the head of its cards business in November last year. Mr Ramachandran has already commenced setting up the credit cards business of the bank. Incidentally, Mr Ramachandran was with Deutsche Bank as head of the credit cards business for India. Earlier, he had worked for Citibank, where he was also associated with the credit card function in various senior positions.

As far as the credit card business is concerned, transactions worth Rs6,934.65 crore were carried out in January 2011, registering a growth of 27.82% vis-a-vis the same period last year. Credit card transactions during January 2010, were at Rs5,425.51 crore, according to the Reserve Bank of India (RBI) data. The number of credit cards in circulation have, however, declined by over 10% to Rs1.81 crore as on 31 January 2011, from 2.02 crore in the same period last year.

During the April-January period of the fiscal, the total transactions carried out via credit cards increased by 21.78% to Rs62,335.44 crore from Rs51,188.94 crore in the April-January period of 2010-11.

On Wednesday, IndusInd Bank ended 3.51% up at Rs253.95 on the Bombay Stock Exchange, while the benchmark Sensex gained 1.21% to 18,206.16.


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