Insurers' manoeuvre led to healthcare tax: CBEC

Asserting that the new healthcare levy is not new and will not hurt the common man, the Central Board of Excise and Customs (CBEC) today said the idea was mooted because insurance companies' tactics resulted in lower collection.

Finance Minister Pranab Mukherjee in Budget 2011-12 proposed levying 5% tax on all services provided by private hospitals having at least 25 beds with central air-conditioning facility and also on all diagnostic tests.

The proposal invited sharp criticism from medical professionals, led by Narayana Hrudayalaya Chief Devi Shetty who termed the levy as "misery tax" and said air-conditioning facility is a must for operation theatres in a hospital.

"How many hospitals in small towns are centrally air-conditioned. The ultimate objective has been that the man who can pay tax, only he would be brought into the net," CBEC Chairman S Dutt said.

Service tax on healthcare was first announced last year, but only on bills settled by insurance companies. But the companies began asking patients to pay first and reimburse later which resulted in low tax collections, he added.

"We never thought, and even now we think, that the 'aam aadmi' (common man) will not be affected by that," he said, emphasising that the tax does not apply if the operation theatre and intensive care unit is air-conditioned.