• Jul
  • 14
  • 2010

Service tax applicable on all cashless mediclaim transactions from July 1 2010

Article ID 31941 | Posted In Service Tax | 5 Comments » Print Friendly and PDF

A new 10.3% service tax has been introduced on all cashless mediclaim transactions from July 1, to be paid by Third Party Administrators (TPA) to hospitals later.  What does this mean for consumers? According to lawyer and consumer activist Jehangir Gai, “Consider that a patient with a cover of Rs 1 lakh has been allowed a claim of the full sum. Now, the TPA has to pay 10.3% of the claim as a service tax. As it cannot pay the hospital about 110% of the original policy sum that the patient purchased, it would have no option but to pay 90% of the original claim plus 10% as service tax.”

Thus, in effect, the consumer’s policy could shrink by 10.3% to accommodate the service tax charges, Gai said, adding that it could even lead to a long-term increase in premiums.

Then, there also is overall concern over slow transactions. Patients have to wait for three to four hours for discharge until their papers are cleared.

“Surely with the levying of a service charge, patients should get quicker service,” said a doctor.

Said Dr Nayan Shah of Paramount Health Services (TPA) Pvt Ltd, “TPAs had asked the insurance companies to clarify whether this new service tax would be claimed from the claim sum or from the existing service tax that is paid on the policy bought by a customer. They categorically told us that the service tax has to come from the claim sum.”

Shah, however, clarified that “if a patient seeks reimbursement from insurance companies, this tax will not be applicable.”