Financial Daily from THE HINDU group of publications
Monday, Apr 18, 2005
Industry & Economy - Taxation
VAT can drive up your hospital bills!
P.T. Jyothi Datta
Mumbai , April 17
THE next time you go in for an x-ray or visit a hospital for a medical procedure, your bill is set to get that much tougher on the pocket. And the pinch comes from the value-added tax (VAT) on medical equipment, pegged at 12.5 per cent.
"Patient charges are set to increase if one goes in for an x-ray or an ultra-sound, for instance, due to VAT on medical equipment.
"The decision to peg it at 12.5 per cent is not in sync with the Centre's rural health mission and its promise to keep healthcare affordable ," says Mr D. Ragavan, Executive Vice-President, Medical Solutions Division, Siemens Ltd.
If medicines can be pegged at 4 per cent and life-saving drugs at zero, why should critical medical equipment be pegged so much higher, points out a representative with an Indian company that imports stents.
(Stents are tiny metal wires used in removing blockages in blood vessels, especially in the heart.)
He says the price of stents would go up in Goa or West Bengal where the sales tax rate on medical equipment was zero.
Here, the price will obviously go up by 12.5 per cent and the cost will be passed on to the consumer.
In Delhi, for instance, VAT is zero on life-saving drugs and medical devices.
But then again, there is the debate on what is life-saving. Any medical procedure or medicine is life-saving in that particular context, the representative argues.
Siemens' Mr Ragavan hopes to represent these anomalies to the Centre through the Confederation of Indian Industry.
"We will ask for zero or four per cent, as it directly hits the paying consumer," he says.
The Government is, in fact, pushing patients away from new minimally invasive procedures, a medical devices company representative points out.
Though price-wise, some minimally invasive procedures are just as expensive as traditional surgical procedures, the human and economic benefits are more in terms of lesser trauma and a shorter stay in the hospital, he adds.
Dr B.K. Goyal, a reputed cardiologist with the Bombay Hospital, points out that while heart-related medical procedures are expensive, pricing is the single inhibiting factor in making critical devices like stents popular.
Drug-coated stents cost between Rs 75,000 and Rs 1.35 lakh.
Further, Mr Vali M. Kasim, Chairman and Managing Director of Interventional Technologies, a medical products distribution company, points out that medical expenses are entirely paid by the patient. For example, there is no health insurance coverage for stenting, he says.
The bottom line, says a top executive with one of Mumbai's corporate hospitals, is that medical equipment companies will sell their products to institutions and hospitals at 12.5 per cent. At the end of the chain, it will be the customer who will have to foot the increase in his bill.
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