Karnataka eats crow on ICU luxury tax

In face of stiff disapproval from the public and the medical fraternity, the Karnataka government has decided to withdraw the controversial 8-per cent luxury tax on patients being treated in intensive care units in the state's hospitals.

State health minister U T Khader on Wednesday said chief minister Siddaramaiah has requested the finance department to withdraw the tax. The official notification will take time, but the tax will not be imposed, he added.

Last week, the government had decided that patients being treated in the ICU of any hospital where the nightly charge is more than Rs1,000 (which would cover most hospitals) would have to pay an extra 8 per cent as luxury tax under an existing law that had never been implemented.

The government's rationale was that the rules make luxury tax applicable to rooms having air conditioning.

The hospitals, which contended that ICUs are air-conditioned not for luxury but to ensure sterile conditions, had not yet passed on the tax to patients.

They had also planned to formally appeal to the government to reconsider the issue.

Under the tax laws of the state, there is a sub-section called Luxury Act for hospitals, which says a room with an AC, television, bed for attendants and such facilities, which are charged at Rs1,000 and above, should be subjected to the 8 per cent tax.

But there was always an understanding that the ICU was not a place for luxury, Dr Nagendra Swamy, president of the Private Hospitals Association, said.

If levied, the luxury tax on ICUs would have garnered extra revenue of an estimated Rs15 to 20 crore per year for the state.