Taking a cue from Union Finance Minister Pranab Mukherjee’s decision to exclude the Centrally-sponsored Rashtriya Swasthya Bima Yojana (RSBY) from the service tax net, the Andhra Pradesh government is also pitching for a similar treatment to its flagship health insurance scheme, Rajiv Aarogyasri.
“Service tax has further contributed to the financial burden in running the scheme. Now, that the Government of India itself has made an exception with regard to the central health insurance programme, we will ask the finance ministry to extend the same to Aarogyasri,” a senior government official told Business Standard.
The state government spends about Rs 925 crore a year on the scheme that covers 19 million families, or 82 per cent of the state’s population. It offers cashless treatment up to Rs 2 lakh per family in a year in 942 procedures, including tertiary and secondary level medical interventions.
The official said the payment of service tax at multiple levels — 10 per cent on premium to the insurance company and another 10 per cent on treatment bills at the hospital level plus an additional 5 per cent tax announced last month on all other services rendered by hospitals — was an unnecessary burden as the scheme has been devised to extend universal healthcare to citizens by the government.
“We have emerged as one of the top ten sales taxpayers in the state as every transaction done under the Aarogyasri programme is meticulously registered with our web-based technology platform. We pay Rs 70 crore towards service tax on payment of premium to the insurance company per year in addition to around Rs 6 crore a month at hospital level transaction,” said C Babu, chief executive officer of the state-run Aarogyasri Trust.
The trust so far has paid Rs 165 crore service tax on premium as the scheme was extended to the entire state besides bringing newer procedures and treatments under it in a phased manner after it was launched in April 2007.
If the Centre gives similar exemption to Aarogyasri as it did in the case of RSBY, the savings as a result of this along with a little more fund from the government would enable the trust to extend the coverage to 159 more medical procedures, he said. The trust pays premium at the rate of Rs 450 per family to the insurance company.