Mr Shrikant Soman (Photo courtesy: http://ehealth.eletsonline.com)
Distinction between charitable hospitals and corporate hospitals :
A distinction needs to be made between Charitable hospitals and Corporate hospitals for Income tax purpose. Charitable hospitals at present do not enjoy any special tax benefits. There are no special tax benefits, such as special subsidized rates for electricity charges or BMC Property Tax etc. Charitable hospitals are treated as commercial entity for all tax purposes, while at the same time Government expects charitable hospitals to give free treatment and concessional treatment to patients - 10 percent free treatment, 50 percent concessional treatment. This levies heavy burden on the management of the hospital. Further Government wants charitable hospitals to join RGY (Rajiv Gandhi Yojana) but does not want to give any tax breaks. Some additional tax breaks may be considered for charitable hospitals.
Service tax exemption :
Charitable hospitals do not have any setoff facility for VAT. So all VAT becomes fully payable. In case of manufacturing industry, the VAT gets set off against the purchase & against sales set off so that net tax burden is minimal.
Therefore it is suggested that Charitable Hospitals should have exemption from paying the service tax to service providers. At present, charitable hospitals are required to pay 14.5 percent which is very high. Currently, service tax of 14.5 percent is payable on following services provided to the hospital:
1. Housekeeping services
2. Man power supply services
3. Catering services, Patient food charges
4. Any legal & Professional charges
5. Telephone/mobile charges
6. Contractor's labour charges
7. Repairs/Renovation charges
8. Xerox copy charges
9. Insurance premium payable for general insurance
10. Any other similar services used by the hospital
It is recommended that charitable hospitals be given exemption from paying above service tax of 14.5 percent on the above mentioned services.