The Union Finance Minister Shri Pranab Mukherjee while presenting the Union Budget for 2011-12 has announced that the Service Tax on Health check up or treatment imposed in 2010-11 would now be replaced with a tax on all services provided by hospitals with 25 or more beds that have the facility of central air-conditioning. Emphasising that though this Service Tax is on high-end treatment, Shri Mukherjee said that there would be an abatement of 50 per cent so that the actual burden is kept at 5 per cent of the value of service.

The Finance Minister said that the levy would be extended to diagnostic tests of all kinds with the same rate of abatement. All Government Hospitals would be outside this levy, the Minister added.

Service tax on hospital services expanded to centrally air conditioned hospitals meeting bed threshold; abatement reduces effective tax burden. Service tax now applies to services provided by centrally air conditioned hospitals that meet a specified bed threshold, replacing the earlier tax limited to health check ups and treatment; diagnostic tests are included, government hospitals are excluded, and an abatement is provided to reduce the effective tax burden.