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VAT collection drive against hospitals unfair'
July, 10th 2014

The Association of Healthcare Providers in India (AHPI) has sought the state government's intervention to stop the recent drive launched by the commercial tax department to collect VAT for medicines and implants provided to patients admitted in hospitals.

The AHPI's appeal, made in association with Indian Medical Association (IMA) and Federation of Indian Chambers of Commerce and Industry ( FICCI), comes after the commercial tax department conducted surveys on prominent hospitals throughout the state on June 30.

The written representation submitted by the AHPI to the state finance and health ministries and also to the chief minister's office, states that for the treatment given to patients admitted at hospitals, a consolidated amount is charged. Using the breakup of different charges given to patients, the authorities of the commercial tax department had been imposing tax on medicines and implants given to the patients during treatment.

In a major drive that surveyed the canteens and medical stores of 45 hospitals across Gujarat, the state commercial tax department detected tax evasion of Rs 10.54 crore and made recovery of Rs 74.81 lakh.

The representation by the AHPI further states that treatment of indoor patients at the hospitals is considered as taxable under the Service Tax Act and, therefore, it cannot again be subjected to VAT.

"Such inconsiderate imposition of VAT on hospitals will only increase the burden of charges on patients and other healthcare services," said AHPI secretary Neeraj Lal.

Officials of the commercial tax department maintain that though some of the canteen contractors and medical stores had been evading tax, many of them were unaware that they were supposed to pay tax on items and services they were offering.

"If a patient visits the OPD of a hospital and takes medicines, he is charged tax on the medicines and other services and that tax is deposited by the hospitals. However, in the case of the indoor patients, hospitals had collected the same taxes but some of them did not deposit it with the government," said a senior commercial tax department official.

The biggest tax detection was made at Vadodara where Rs 5.36 crore in unpaid taxes was detected at canteens and medical stores of the five hospitals surveyed. In Ahmedabad, 15 such hospitals were surveyed and from them Rs 60 lakh was recovered and another Rs 3.52 crore detected. Five hospitals are still under scrutiny.

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