Budget 2011 – Service Tax Changes – Health Insurance Premium set to increase

Health Insurance Premium costs are set to rise, with FM bringing in all services provided by hospitals with 25 or more beds and with air-conditioning in the service tax net.

Service Tax on Health Services
The mediclaim or health insurance will be increase because –
1. All health check-ups in air-conditioned hospitals are set to become expensive.
2. Any treatment in any air-conditioned hospital with a bed capacity of more than 25 means adding 10% to patients’ total hospital bill will be subject to new service tax.

Will it impact both cashless and reimbursements facility of hospitals?
Yes, earlier there was a service tax levied on cashless facility on health insurance policies. So while a customer, who paid for hospitalisation expenses did not pay any service tax, an insured individual availing the cashless benefit would have to pay a service tax.

Budget 2011 – Service Tax Change
Health Services [section 65 (105) (zzzzo)]
1. The existing service is being substituted with a new description as follows:
a) Services provided by a clinical establishment having the facility of central air-conditioning in whole or any part of the establishment and more than 25 beds for in-patient treatment at any time of the year; and
b) Services provided by a clinical establishment in relation to diagnostic tests of any kind or investigative services with the help of a laboratory or medical equipment
c) Service provided by doctors, who are not employees, from the premises of a clinical establishment.
2. The head will not cover an establishment under the ownership or control of government or a local authority including Primary Health Centre and ESIC hospital. Autonomous medical institutes set-up by the government by a special act of parliament are also outside the levy.
3. Only such doctors will be covered who provide services from the specified premises of a clinical establishment in a capacity other than as employee of such establishment.
4. Finance Minister has announced 50% exemption from the value of this service.
The exemption notification will be issued when the new levy is enacted.
5. Parliament has already passed The Clinical Establishment (Registration and Regulation) Bill, 2010. The Act will apply to such States as have given their consent for the same. The Act prescribes registration of all Clinical Establishments and maintenance of prescribed records and other reporting requirements. These can be referred to the extent they are relevant for the purpose of this levy.