March 10, 2011

The Hon’ble Finance Minister

Government of India
North Block, New Delhi – 110 001

Dear Sir,

Sub: Plea to consider reversal of Service Tax on health care

The Health sector desperately needs tax incentives for ensuring that the benefits and access to
high quality care is made available to the common man. Today, in our country, less than 10%
of the population can afford to undergo any kind of major surgery such as those for the heart,
brain or for cancer. India requires about 25 lakh heart surgeries to be performed annually.
However, all the hospitals in the country put together perform less than 90,000 heart surgeries
per annum. The remaining people in need of surgery continue to suffer and gradually die over
a period of time.

There are certain facts about the Indian health sector which are noteworthy.

1) The Indian Government spends about 1% of the GDP on the health sector. 80% of the
national expenditure on health is borne out of pocket by the citizens by spending their
life’s hard earned savings or by selling assets and borrowing.

2) Less than 5% of the surgeries performed in the country are done in the Government
hospitals. It is the private sector hospitals which perform the largest number of
surgeries. Approximately 1.5% of the country’s population require some kind of
surgical intervention annually, without which they can die.

3) The exorbitant cost of health care is the commonest cause of rural indebtedness.

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 4) India has one of the worst indicators of health, such as maternal and infant mortality,
amongst developing countries.

5) High cost and inadequate access to preventive health check up results in patients
opting for medical treatment in the advanced stages of the disease. This results in high
cost of treatment and reduced probability of good outcomes.

The proposed levy of 5% service tax on health care has a direct adverse impact on health care
–

1) The proposal will affect all hospitals providing secondary and tertiary care since all
centrally air-conditioned, both fully and partly air-conditioned, will be taxed. The
National Accreditation Board for Hospitals (NABH) sets the basic standards for
healthcare in the country and it is the requirement of NABH that all Operation
Theatres are centrally air-conditioned. This is obviously done with a view to prevent
infections and to ensure excellent outcomes. In other words, air-conditioning is a
basic requirement in hospitals rather than a luxury.

2) All large charitable hospitals genuinely caring for the poor are come under the service
tax net. Hospitals like these all over the country are involved in serving the poor,
carrying out a task of the Government. The Service Tax if imposed will be a burden
which will have to be borne by the hospital and will adversely impact the care of poor
patients. It is not true that air-conditioned hospitals are for the rich. Air-conditioning
is an essential requirement for ensuring patient safety, whether rich or poor.

3) Large number of the surgeries is performed with the help of donations from
benevolent individuals. Moreover, hospitals often cross subsidize the cost of treatment
of the poor from the hospitalization expenses of the affluent. In the new scheme of
things, the additional burden of the service tax will have to be borne by the hospitals
or the donors.

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 4) For a heart surgery, the patient must pay the Government tax ranging between Rs.
5000 to Rs. 20,000 and for cancer treatment followed by radiotherapy and
chemotherapy, the tax burden for the patient can be about Rs. 20,000 to Rs. 50,000.
For complex life saving procedures such as bone marrow transplants or liver
transplants, the service tax component can be as high as one to two lakh rupees.

5) Micro-health insurance schemes are run by the Governments for the poor by
collecting five to ten rupees per month. These schemes are also charged 10% service
tax. The only way for ensuring inclusivity in health care access can be by the
Government launching low cost health insurances by collecting low premiums from
the poor. This will only happen with incentives from the Government and not by
additional tax burden.

6) Service tax on diagnostics will discourage people from going for preventive check up
with disastrous consequences.

In order to make health care accessible to the common man, we have a wish list for the
Government.

1) Complete removal of service tax on health including the 10% service tax on health
insurance.

2) Removal of custom duty on implants and equipments for at least ten years, till health
care becomes available to all.

3) Provision of infrastructure status to health care. There is an immediate need to add 2

million more hospital beds to serve the country's needs and providing infrastructure
status will help in achieving this stiff target.

We would very grateful to your good self and the Indian Government for considering our
request. We believe that this will go a long way in ensuring access to high quality health care
to all Indians.

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Thanking you.

Sincerely yours,

Mrs. Chithra Gopinath

Managing Director
Edappal Hospitals (P) LTD,
Edappal (PO) - 679576
Malappuram (DIST),
Kerala

Copy To:

1. Prime Minister of India, Room No-148 B, South Block, Raisina Hill, New Delhi 110001.
2. Governor of Kerala, Kerala Rajbhavan, Vellayambalam, Trivandrum – 695 099

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