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Delhi govt slaps VAT on medical implants
February, 25th 2013

Drugs used during hospital treatment and all medical implants such as heart stents, pacemakers and those used in dental procedures are set to become costlier in the capital, with the government deciding to impose value added tax on these products.

Delhi government on Sunday issued a public notice asking hospitals to pay VAT on these items, which may raise costs by around 5%. It wasn't immediately clear if this would be covered under medical insurance.

"Administering of drugs, medicines, inserting implants during diagnostic tests and treatment, including package treatment constitute 'sales' and are taxable. We are not imposing any new tax but notifying existing laws," said Prashant Goyal, Delhi VAT commissioner.

Goyal said there was no proposal to levy tax on services such as doctors' consultation or surgery fee.

He said most corporate hospitals offer package deals for different surgical procedures which includes the cost of medicines, implant and prosthetics, as required. "It has been seen that many hospitals buy a particular implant or medicine for say Rs 10 but they charge Rs 15 from the patient. Our aim is to make them accountable for the extra profit," he added.

Delhi has more than 800 private hospitals and nursing homes but barring a few, most do not pay VAT.

Delhi VAT Act was implemented in 2005 and as per law offenders can be prosecuted for civil and criminal liabilities. But, officials said, most hospitals were dodging the process claiming that providing medicines or implants to patients is a part of treatment and it cannot be considered as 'sales'.

"The Kerala High Court, while hearing a petition filed by the Kerala private hospitals' association in October last year clearly stated that medicines and consumables sold to patients through hospital pharmacies would be taxable under the VAT Act. It dismissed the latter's plea disputing their liability to register as dealers under the Act," a senior official said.

Hospitals said the tax would be passed on to the patient. "This will increase the cost of healthcare because the burden of these taxes will finally be borne by patients. The government should find other ways of generating revenue. In my view, import duty on MRI machines and other costly equipment should also be brought down so diagnosis and treatment becomes cheaper," said Rajiv Tewari, director, health and wellness, Rockland hospital.

Tewari said patients in the hospital were given bills detailing the medicines and equipment used for treatment.

Dr Pervez Ahmed, managing director of Aapka Urgicare, too termed the government move as a retrograde step and said this would deject entrepreneurs working towards improving the city's health infrastructure. In the Union budget 2011-12, the Centre had proposed imposition of 5% service tax on treatment in private hospitals, paid either by individuals, insurance companies or firms, a move described as 'detrimental' by industry players. The proposal was later dropped. State health minister A K Walia was not available for comment on the new move.

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