The Health of a Nation is far more important than the wealth of a Nation. Nothing is more saddening than physical bankruptcy and ill health. It is undoubtedly a vital principle of Bliss. It is the prime responsibility of any Government to keep the health sector free from various taxes so that the affordability does not hinder in keeping the Nation in good health. However, the Ministry of Finance is in constant search of service sectors, which can be brought under the ambit of Service Tax. Once such sector is the health sector. The Ministry feels that with the change in the style of functioning of the business organizations, health check up is a routine facility provided by the employers to their employees. The main purpose is to ensure that the productivity of the organization is not adversely affected due to ill health of its employees. Such activities, commonly known as corporate health check up schemes, are undertaken by designated hospitals in order to detect any medical indicator or to ensure timely diagnosis of any disease so that prophylactic measures can be taken. In such cases, the hospital providing these services charge the employer i.e. the business organization and it constitutes expenditure for the latter. In certain cases as for example, in case of flight crew pre-flight checkups are conducted not only to test the fitness levels but also to rule out the possibility of the flying crew being under intoxication. Such health check up schemes is being brought within the ambit of service tax under the new service. The Finance Bill 2010 proposes a new Taxable service under Section 65 (105) (zzzzo). Accordingly services rendered by any hospital or nursing home or multi-specialty clinic, to an employee of any business entity, in relation to health check-up or preventive care will come under the ambit of Service Tax. However, the same will be charged to Service Tax only in those cases where the payment for such check-up or preventive care is made by such business entity directly to such hospital, nursing home or multi-specialty clinic. Further the said Finance Bill 2010 also propose to bring under the ambit services rendered by any hospital or nursing home or multi specialty clinic to a person covered by health insurance scheme, for any health check-up or treatment, where the payment for such health check-up or treatment is made by the insurance company directly to such hospital, nursing home or multi-specialty clinic.
A large number of health insurance schemes are being offered by the insurance companies under which charges for hospitalization, surgery, post-surgical nursing etc. are generally paid by the insurance company. Such insurance policies, which fall under the category of general insurance service, are already taxable. Under general insurance service, an insurance company is a service provider to its clients. Under the proposed new service, tax is also being imposed on the medical charges paid by the insurance companies to the hospitals on behalf of a business entity for its employees. As such, the insurance company would be the service receiver and the tax paid by the hospital would be available to the insurance companies as credit. However, the Ministry of Finance has ensured that individual will not be taxed. In other words, there is an exemption to the individuals to ensure that an individual is not required to pay a tax for which he cannot take credit. The tax on the above-mentioned health services would be payable only if and to the extent the payment for such medical checkup or treatment etc. is made directly by the business entity or the insurance company to the hospital or medical establishment. Any additional amount paid by the individual i.e. the employee or the insured, as the case may be to the hospital would not be subjected to service tax. The above service will come into effect on enactment of the Finance Bill 2010. The health sector feels unhealthy as such Service Tax is being proposed.