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Union Budget 2012-2013: Hospitals not likely to get infra status

A senior finance ministry official told Mail Today that "health like education comes in the social sector, so we cannot accord it infrastructure status at this point".

S.P.S. Pannu | January 30, 2012 | Updated 09:41 IST

With the finance ministry coming under increasing pressure to raise resources in a slowing economy the demand by India Inc for conferring infrastructure status to hospitals in order to avail of tax concessions is not likely to come through in the forthcoming Budget .

A senior finance ministry official told Mail Today that "health like education comes in the social sector, so we cannot accord it infrastructure status at this point".

The Federation of Indian Chambers and Commerce and Industry (Ficci) has, in its pre-budget memorandum submitted to the government, made out a case for giving infrastructure status to the healthcare sector, which has been made eligible for support to private-public-partnership (PPP) without the annuity provision.

The memorandum states that in order to realise the dream of affordable and accessible healthcare to all at a time when the disease burden is burgeoning in the country "the immediate need of the hour is to accord infrastructure status to the sector for improving investment activity".

Infrastructure status to hospitals would entitle them to tax exemption on their entire profit for 10 consecutive years, beginning with the initial assessment year in any 15-year period starting from the date of operation of a new hospital facility anywhere in India.

This saving could be ploughed back to expand hospital beds, which would lead to better healthcare. Infrastructure status to hospitals would also make them eligible for loans on a priority basis at concessional rates.

Another Budget-related issue raised by the healthcare sector relates to the service tax that has been imposed on health services provided to company employees with an insurance cover.

Initially, when the 2011-12 Budget was presented, service tax of five per cent was imposed on all patients undergoing treatment in air-conditioned hospitals. However, this had led to a big hue and cry as it was seen as a 'misery tax' imposed on people at their weakest.

Finance minister Pranab Mukherjee had then rolled back the tax for individuals. However, health services provided by clinical establishments expect public entities under health insurance schemes to pay service tax when the payment is made directly by the insurance company.

"In a country that is well behind the curve in public spend and coverage of healthcare services to its population, this tax inflates healthcare costs to the common man and should be rolled back," the memorandum to the finance ministry states.

Service tax is also imposed on preventive health check-ups where payments are made by the employer or business entity for which an individual works.

The Ficci memorandum makes the point that this service tax should be "omitted immediately" in a scenario where preventive healthcare needs to be given a fillip. Most doctors are of the view that with the incidence of lifestyle diseases, such as diabetes and cardio-vascular ailments rising rapidly in the country, these preventive checks can provide timely intervention and save precious lives. There is, therefore, a need to encourage such preventive check-ups instead of putting them under the tax net.

Courtesy: Mail Today 

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