FM withdraws proposal for service tax on healthcare

Finance minister Pranab Mukherjee today announced withdrawal of the proposed 5% service tax on air-conditioned hospitals with more than 25 beds and on diagnostic 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

New Delhi: Bowing to demands from all quarters, finance minister Pranab Mukherjee today announced withdrawal of the proposed 5% service tax on air-conditioned hospitals with more than 25 beds and on diagnostic services, reports PTI.

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," Mr 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 28th February, 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".

Meanwhile, garment traders had criticised the proposed 10% excise duty on readymade garments saying it would hurt the small business.

"To address this concern, I propose to enhance the abatement of 40% to 55% 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 Rs8.9 crore in the current year," the minister said.

Under the revised norms, 10% excise would be levied on 45% of the tariff value of retail price on branded readymade garments as against 60% proposed in the original budget proposal.

Mr Mukherjee, however, retained his proposal to extend 18.5% Minimum Alternate Tax (MAT) on SEZ developers and units.

With regard to the proposal to reduce basic customs duty on raw silk from 35% to 5%, the minister said it was aimed at augmenting the supply to weavers in both handloom and the powerloom sector.

Pointing out that he had received divergent opinions on the tax initiatives for the sector, he said, "I would like to assure the House... and respond, if required, to mitigate any adverse impact on the domestic sericulture sector."

Referring to the financial sector reforms, he said, the government proposes to pursue three more financial sector legislations-PFRDA Bill, the Bill on Factoring and Assignment and the State Bank of India Subsidiary Bank Law Amendment Bill-in the coming days.

Mr Mukherjee had earlier in the day tabled the Banking Law Amendment Bill 2011 and the Constitutional Amendment Bill for introduction of Goods and Services tax (GST).

On the crisis emanating from political uncertainties in Middle East and Libya, Mr Mukherjee said the country can withstand the impact of such crisis.

"We hope for an early and peaceful resolution of the disturbing developments in the Middle East and in Libya. I am prepared for uncertainties in the globalised world," he added.



Shadi Katyal

7 years ago

Is the nation not much taxed yet. we had gift tax when Indians sent money to parents so thay can live. we have tax on speed mail as it is not part of Post Office
Why any sane man will think of tax on hospitals with Ac or not. Does teh Govt not tax enough to Doctors and other technical staff.
I presume we mighyt have tax for getting sick as we do have death tax on the wealth of deceased.
When is the aam admi going to be taxed for sleeping on the footpath or even walking around and thus wearing the roads adn foot paths?
Maybe Govt should charge tax for evening or morning walkers .
Shame Shame on FM for even thinking of such tax but with 64 ministers and thousands of Babus doing nothing, Govt does need money. Could we not have saved Crores on CWG if thee was accountability and not had to ask for this shameless tax

Centre for Social Research: Misplaced humour

The commercial by the Centre for Social Research takes the subject of female infanticide head on. But the issue requires some hard hitters that can produce more than cheap laughs

Okay, so here's another effort to curb gender bias. Given the alarming growth in the rate of female infanticide in this country, the more the merrier. The Centre for Social Research (CSR) has released a commercial that takes on the issue of male child preference head on. And instead of preaching on the subject (which seldom works), they have found an entertaining way to communicate the message. But there's a problem with this route-we'll come to that shortly.

The public service film features eunuchs, in fact, many of them. A scared looking bugger arrives in a eunuchs' colony. Naturally, he gets teased and tormented. But the chap trudges along, clearly looking for someone. He finally spots a group of eunuchs playing a game of ludo. He identifies one of them, and reminds her that she had visited his house many years ago when a girl child was born in the family. The eunuch makes fun of him on hearing this. The man says he had driven her away at the time, but has now arrived, after all these years, to make amends. He flashes a wad of currency notes and hands it over to the eunuch, much to the latter's pleasant surprise. So then why the change of heart? Well, clearly that particular girl child has gone on to become a highly successful individual, thus making the family proud. And the guilt-ridden daddy aims to set things right.

Yes, there's an insight out here. Eunuchs are usually summoned when a male child is born into a conservative Indian family, because they are supposed to bring good luck. And they aren't invited when a girl is born, or are paid a pittance, as the family typically goes into 'mourning'. So far, so good.

The problem is this: While the eunuchs and the way they scare the hell out of the man makes for good, mass entertainment, that's where the commercial stays. In the quest to be humorous on such a serious matter, the real message of the ad, which is to treat both genders equally, gets lost. Sure, there is that emotion of a guilt-ridden dad waking up many years later to atone for his misdeeds, but sadly, it gets diluted by all the eunuch colony shenanigans. I suspect most viewers in the target segment will enjoy the commercial and then continue with female infanticide.

So, yes, kudos for the effort. But the next time around they need to produce some hard hitters. There's no place for cheap laughs on this subject.


India card Rupay to replace Visa, MasterCard

Rupay, the unique India Card which is set to replace global real-time payment processing firms like Visa and MasterCard, is expected to be launched in a few months once the systems and network are in place

Mumbai: After almost two years of planning, the National Payments Corporation of India (NPCI) has at last finalised the proposed unique India Card which once commercially launched would be an domestic alternative to the global real-time payment processing firms like Visa and MasterCard, reports PTI.

"We have finalised name of the proposed card as 'Rupay' at our board meeting here on Monday. We have also finalised the logo for the same," a senior official of the Reserve Bank of India (RBI)-set up NPCI, told PTI last evening.

The official sought not to be named.

The official further said the leading financial consultancy firm Ernst & Young (E&Y) will develop and roll out the entire architecture, including the design and software for the Rupay card rollout.

A senior E&Y official confirmed the development to this agency. He further said, the NPCI will initially launch a domestic ATM/debit cards to begin with and then would hit the credit card market later on.

In 2009, the RBI had asked the Indian Banks Association (IBA) to launch a not-for-profit company and design a rival card, then tentatively called India Card, that meets the requirements of the domestic banks.

And finally, RBI plan is materialising and Rupay will be like the Union Pay of China, which is the domestic real-time payment processing firm for Chinese banks, and was planned to be launched last year.

The commercial launch is expected in a few months, once the systems and network are in place.

Domestic banks now have no option but to tie up with Visa or MasterCard for connectivity between cardholders, merchants and issuing banks not just within the country, but across the globe in the absence of a domestic card.

Every transaction done here using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard, which are based outside the country. But now the Rupay would eliminate the need for this connectivity.

Domestic banks paid around Rs500 crore last year as fees to these global card firms for processing debit and credit card payments, 90% of which were domestic deals.

The Rupay initiative entails the setting up of a network switch, which acts as a payment gateway that connects all the ATMs and points-of-sale (PoS) terminals. The domestic system is meant to gradually replace payment settlement providers like MasterCard and Visa, which now control all payments and settlements that happen through cards.

NPCI is registered as a company with nine public sector, private sector and foreign banks owning stakes. RBI will oversee its operations in the initial years. Thereafter it will function as an independent company regulated by RBI, according to the RBI policy paper on Payment systems vision 2009-12.

"The concept of a domestic payment card (India Card then and now Rupay) and a PoS switch network for issuance and acceptance of payment cards would be looked into. The need for such a system arises from two major considerations (a) the high cost borne by the domestic banks for affiliation with international card associations in the absence of a domestic price setter (b) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country," the RBI had said in its vision paper.

As per the latest RBI data, debit card transactions rose 49% to Rs3,712.67 crore in January 2011, against Rs2,491 crore y-o-y. The number of debit cards in use also rose by 25% in the reporting month to 21.82 crore up from 17.41 crore as on 31 January 2010.

In the April-January period, the total transactions carried out by debit cards jumped by 47.06%, to Rs32,029.24 crore, from Rs21,779.83 crore in the first 10 months of the last fiscal, according to RBI data.

Against this, credit card transactions rose 28% in January to Rs6,934.65 crore, despite a 10% drop in the number of credit cards in circulation. As of 31 January 2011, there were 1.81 crore active credit cards in the country, down from 2.02 crore y-o-y.

During the April-January period of the current fiscal, the total transactions carried out via credit cards increased 21.78% to Rs62,335.44 crore as against Rs51,188.94 crore in the year-ago period.




7 years ago

Very good news, thanks, been a while in coming. It is muchmore than the 500 crore in fees. It is all about our own sovereignity as far as as our payment processing industry and float are concerned, and more.

HOWEVER. Why does the RBI or Indian Government need software and technology from Ernst & Young, do we know who the real owners or backers of Ernst & Young are, for example? To my knolwedge, E&Y Global, the holding company for E&Y, are hidden behind a mask of UK companies routed through various fronts, which then submerge in the usual Channel Islands/BVI kind of opaque cutouts.

RBI should take cognizance of this, and the Indian Government should demand that the real owners and controllers of E&Y come out in the open before placing such serious responsibilities on them.

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