Pvt schools, hospitals to be in service tax net

Will have to pay 12% tax besides 3% education cess.

Service tax of 12 per cent (plus the education cess of 3 per cent) will soon be levied on fees charged by schools, doctors and hospitals.

A decision to this effect was taken by the Empowered Committee of State Finance Ministers on Value-Added Tax (VAT) at a meeting in Srinagar on June 15.

The committee decided that private schools and hospitals, amusement parks, coin-operated amusement machine services and other recreation and amusement services will be brought under the tax net from the current financial year. The government will now amend the Service Tax Rules, 1994 to impose the tax.

Consequently, service tax at the rate of 12.36 per cent will be levied on all institutions providing pre-school education, secondary education as well as technical and vocational educational services in case the fees charged is more than Rs 1,000 per month.

Similarly, service tax will be levied on all private hospitals, including those providing primary healthcare, though services provided to families living below the poverty line will be exempt.

Healthcare companies said the tax would make their services more expensive. "Healthcare players will have no option but to pass on the additional tax burden to the patients," said Daljit Singh, president (operations), Escorts Heart Institute and Research Centre Ltd.

Added Max Healthcare Ltd Executive Director Mukesh Shivdasani: "A cardiac surgery that costs Rs 2,00,000 now will become more expensive by Rs 25,000."

The Centre had agreed to give the entire tax collection from 33 services to compensate states for the phasing out of the central sales tax from the current fiscal.

It was also agreed that another 44 services would be brought under the tax net "" the new services identified at the Srinagar meeting are the first five of the lot. The tax collection from the 33 services is likely to fetch states about Rs 4,000 crore this year.