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10.3% service tax on cashless
July, 13th 2010

As if the sudden move by government-owned insurance companies to curtail the cashless mediclaim facility to fewer-than-before hospitals wasn't enough, consumers now have another insurance squeeze to contend with. The Union government has introduced a service tax of 10.3% on every claim made using the cashless facility. Both these moves were introduced on July 1.

While the introduction of the preferred provider network (PPN) by public sector insurance companies has had the instant impact of bringing cashless transactions to a virtual standstill in metros, the service tax move has practically gone unnoticed.

Experts, however, say the tax certainly has an impact on consumers and their insurance cover. "It shrinks the total cover available to a patient," said consumer activist and lawyer Jehangir Gai. Dr Ajay Thaker, CEO of Jupiter Hospital in Thane, felt that the service tax was discriminatory.

"Only patients who claim the cashless facility will have to pay the service tax while the patients who go in for reimbursement won't have to pay any extra sum," he said.

A high-ranking official of United India Insurance Co Ltd maintained that the service tax should not be seen as a burden, as TPAs would be reimbursed for it. "Moreover, it is paid by every sector. No one complains about paying service tax on motor vehicles," the Chennai-based official said.

Incidentally, the service charge component won't be visible to consumers. It is a sum that will be paid by TPAs (Third Party Administratorsfirms that liaise with hospitals on behalf of the insurance company that appoints them) to hospitals after every cashless transaction. "We have been told by TPAs that they will pay the service tax component along with the patient's claim. We (hospitals) will forward this sum to the Union government," said Jaslok Hospital CEO Colonel M Masand, who heads the Association of Hospitals.

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