Pranab hints at review of proposal to tax healthcare services

Pranab hints at review of proposal to tax healthcare services

Finance Minister Pranab Mukherjee has hinted at review of his proposal to impose 5 percent service tax on high-end health care services which was described as "misery tax" by the medical community.

Mukherjee, who was replying to general discussion on the budget in the Rajya Sabha on Monday, also referred to the issue of black money.

He said the revenue authorities were able to detect tax evasion of about Rs 1 lakh crore during the past 18 months as a result of international cooperation as well as domestic surveillance.

Apparently referring to the proposed 5 percent service tax on high-end health care, he said: "That (review of tax proposals) can be announced or decided only at the time of Finance Bill. Therefore I will request those who are agitating to wait till the Finance Bill is being approved by Parliament", he said.

The House later returned the Appropriation Bills, completing the first phase of the three-stage exercise for passage of the budget.

The Lok Sabha had earlier approved the Supplementary demands for grants for 2010-11 and relevant Appropriation Bills.

Mukherjee in the budget for 2011-12 proposed to impose a service tax of 5 percent on all services, including diagnostic services provided by a centrally air-conditioned clinical establishments having more than 25 beds for in-patient treatment.

The proposal evoked sharp reaction from the medical community which described the service tax on healthcare as "misery tax". They have also submitted representation against the proposal to the Finance Minister.

The Finance Bill is likely to be considered by Parliament next week. The budget session of Parliament would conclude on 25^th March.

On tax evasion, Mukherjee said mis-pricing in international transactions to the extent of Rs 33,784 crore has been detected and brought under taxation in the past year and a half.

An amount of Rs 25,000 crore has also been found during search and seizure operations during the period, he said.

Besides, he said, during assessment the Directorate of Foreign Taxation detected tax evasion of Rs 34,601 crore.

In addition to taxing unaccounted money, Mukherjee said, the efforts would have to be made to raise the tax-GDP ratio to a "reasonable level" of 12-14 percent to enhance the government's capability to fund social sector scheme.

"I do believe that Tax GDP ratio, which has come down to 10 per cent plus, must reach 12 per cent so that the Tax GDP ratio is at reasonable level," he said.

It should be 12-14 percent and the share of direct taxes, which is non-inflationary, should be more in the kitty, he said.