Mumbai: Private healthcare services, which cater to about 70% of primary healthcare in the country, will become more expensive with the direct and indirect tax proposals announced in the Union Budget 2011.
The cost of healthcare services provided by private sector, which is already on a higher side with no regulation on hospital charges yet in place, will see further rise with the 5% service tax on diagnostics services, inclusion of most of the private hospitals in the service tax net.
While a 1% hike in excise duty for vaccines and IV fluids and other medicaments including ingredients used in traditional medicines will get translated into a direct price rise for these products.
At the same time, many of the suggestions made by the healthcare industry like infrastructure status and duty exemptions for imported medical equipments, which would have helped the sector to make the cost more competitive for the patients, were not addressed in the Budget.
This is despite the Budget proposal to increase allocations for healthcare by 20% to Rs26,760 crore, and extension of Rashtriya Swasthya Bima Yojana to cover unorganized sector workers in s hazardous mining and associated industries.
Since there is no proper implementation strategy in place for public healthcare, these schemes may not show a visible impact.
“The Indian health sciences industry has witnessed a budget without much tax mention. Whilst there were few positives for this industry, the industry wish list largely remained unaddressed,” said Hitesh Sharma, partner and life sciences leader at consultant Ernst and Young Pvt Ltd.
On the indirect tax side, diagnostic and testing services (other than in a government hospital) would be liable to service tax, with an effective rate of 5%.
Also there is a levy of 1% excise duty on vaccines, intravenous fluids and Medicaments (including those used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems), where there is no cenvat credit being availed.
All in all, in the wake of transitioning to new direct tax code and goods and service tax, the government has not attended to the prescription for growth for the health science industry.
“With no proposals to encourage investments in healthcare, and at the same time several direct tax impacts on the private healthcare cost, the Budget has disappointed the pharma and healthcare sector,” said Sujay Shetty, head, life sciences practices at consultant PriceWaterhouseCoopers.
“There is no agenda on healthcare. Though the government has made many encouraging provisions for infrastructure, it missed the opportunity on health care by not including this in those provisions,” said Vishal Bali, chief executive, Fortis Healthcare Ltd. Moreover, the service taxes will directly add the cost for the patients, he added.