New Delhi, Mar 22 (PTI) Bowing to demand from all quarters, Finance Minister Pranab Mukherjee today announced withdrawal of the proposed 5 per cent service tax on airconditioned hospitals with more than 25 beds and on diagonistic services.

He also provided some relief to readymade garment manufacturers by raising the abatement available for levy of taxes on retail price of some branded garments and textile made-ups.

"The purpose of the new levy (healthcare) was not merely to mobilise revenue, but to pave the way for introduction of the GST.

"However, I have decided to exempt the new levy in its entirety both in respect of services provided by hospitals as well as by way of diagnostic tests until GST comes into force", Mukherjee said while moving the Finance Bill in the Lok Sabha for consideration and passage.

Service tax exemption on specified hospital and diagnostic services maintained until GST implementation; garment retail abatement increased. The proposal to impose a service tax on air conditioned hospitals with more than twenty five beds and on diagnostic services was withdrawn and those services are exempted from the levy until the Goods and Services Tax comes into force; additionally, the abatement on the retail price of certain branded readymade garments and textile made ups was increased, reducing the taxable base for those products.