• Jul
  • 14
  • 2010

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

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.”

Sandeep Kanoi

5 Responses to “Service tax applicable on all cashless mediclaim transactions from July 1 2010”

  1. Bidhan Chowdhury says:

    Hospitals are facing lot of problems in charging the service tax while preparing the bills.

    1. If the bill is of rs. 50000 and tpa approves 45,000. in this case initially hospital will charge 10.3% of 50,000 but when tpa will pay, the amount would be of 10.3% of 45,000

    this point is not cleared to any hospital, and this way makeing chaos and disappear clarity

  2. vijay says:

    yes ultimately policy holder clearly stands to loose

  3. Ravi says:

    But ulimatelly policyholder will get 10.3% less amount out of his/her mediclaim amount…

  4. sreehari says:

    There is no double taxation involved. Both are entirely different services. Service initially is by the insurance company while floating and servicing the policies and the second one is later by the hospital when rendering medical treatment to the policy holder.

  5. ravindra says:

    this is clearly double taxation. First the premium paid had service tax element in it. Now in fair business total pay out by insurance company would be less than the premium totals . paying govt out of claim amount in the form of service tax out of sums received as premium is double benefit for the govt and totally unjustified.

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