Budget will push up healthcare costs: experts

Finance minister Pranab Mukherjee's move to levy a tax on all services provided by private hospitals with more than 25 beds and diagnostic centres with central air-conditioning is certain to make healthcare costlier, say doctors and experts.

"The cost of healthcare would obviously go up by 5-10 per cent due to the service tax on services provided by hospitals and diagnostic centres that have air-conditioning," said Bomi Bhote, chief executive officer of Pune's Ruby Hall Clinic.

Last year, the union government had imposed a service tax on health check-ups or treatment. This levy resulted in differential treatment between persons who make payments themselves and others where payments were made by an insurance company or a business entity, finance minister said in his budget speech on Monday. He proposed to replace it with a tax on all services provided by private hospitals with 25 or more beds that have central air-conditioning as well as diagnostic centres.

On the implications of the proposed service tax on healthcare, Sainath R Pradhan, general manager (projects) of Jehangir Hospital, said, "Now, individuals will also come under the net of service tax. Though the tax is on high-end treatment, it is not yet clear which category of 'high-end' services will be taxable and which will be exempt."

He added, "Currently, corporate houses and insurance companies bear a 10 per cent burden of the service tax. It has been reduced to 5 per cent, but by including the cash-paying patient, the ambit of the service tax net has been widened," Pradhan said.

Avinash Bhondwe, former president of the Indian Medical Association, said, "Micro-guidelines are required to clear things about service tax on all services provided by hospitals with central air-conditioning. As the intensive care units and operation theatres of all hospitals are all compulsorily air-conditioned, does this mean services of ICU and OTs will also bear the brunt of the services tax?"