Contact UsLodha Excelus, 1st Floor, Apollo Mills Compound, N. M. Joshi Marg, Mahalaxmi, Mumbai – 400011

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• Under the “Health for All” initiative of the new government, free diagnosis services and free drug services have been given priority

• Two new National Institutes of Ageing to be set up at AIIMS, New Delhi and Madras Medical College, Chennai for early quality diagnosis and TB patients’ treatment

• A national level research and referral institute for higher dental studies to be set up in one of the already existing dentalinstitutions

• INR500 crore set aside to set up four more AIIMS-like institutions in Andhra Pradesh, West Bengal, Vidarbha (Maharashtra) and Poorvanchal (U.P)

• 12 additional government medical colleges with dental facilities to be established

• 15 Model Rural Health Research to be set up in the states that undertake research on local health issues concerning rural population

Sandeep BhallaPartner, International Tax & Regulatory

Summary CommentsProvisions in this year’s budget are indicative of the focus on ensuring that quality healthcare reaches every level of thedemographic pyramid. The provisions also aim to address the infrastructure deficit and bridge rural-urban disparity. Focus onaddressing the skill gap via the National Skilling Programme is also commendable. The theme clearly reflects the proposition ofproviding greater access to care. However, providing industry status to healthcare would have helped, as well as incentives fordomestic manufacturing of medical devices and consumables.

Union Budget 2014Healthcare Sector - Implications

Policy Announcements

BSR & Affiliates

No change in corporate tax rate, surcharge and education cess. Maximum effective tax rate incase of domestic and non-resident corporates would continue at 33.99 percent and 42.02percent, respectively

Deduction under section 35AD is now allowed only if the asset is used for the purpose of thespecified business for a period of 8 years.

Where any asset, in respect of which deduction claimed under Section 35AD, is not used for thespecified business (including building and operating hospital with atleast 100 beds) for a periodof 8 years, the deduction claimed net of notional tax depreciation allowable shall be treated asincome in the year of non-compliance

Amendment to provisions of not-for-profit organisations registered under section 12AA – No benefit of double deduction in respect of depreciation on capital assets, since entire

capital expenditure allowable as application of income No income otherwise exempt under section 10 (except agricultural income and income under

clause 23C) shall be reduced from income derived during the year Specific exemption provisions to apply to NPOs for previous years pending assessment on

fresh registration, not previously refused or cancelled provided that objects and activitiesremain unchanged

Additional grounds provided for cancellation of NPO registration in case activities not carriedout in accordance with specific provisions under section 13(1)

Direct Tax

Waman ParkhiPartner, Indirect Tax

Contact UsLodha Excelus, 1st Floor, Apollo Mills Compound, N. M. Joshi Marg, Mahalaxmi, Mumbai – 400011

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Union Budget 2014Healthcare Sector - Implications

• The existing provisions for interest payment made by a specified company (which includes an Indian company engaged in the business of hospitals and other healthcare services) to a non-resident, in respect of borrowing made in foreign currency between 1 July 2012 to 1 July 2015, is subject to withholding tax at a lower rate of 5 percent. The same is proposed to be extended to 1 July 2017

• It is proposed that the APA concluded may also cover 4 years preceding the years covered by the APA, subject to the rules that will be framed in this regard

• Concessional tax rate of 15 percent on dividend from foreign subsidiaries / associates to be continued (without any sunset date)

• The Budget Speech announced that resident tax payers would also be able to obtain an advance ruling in respect of their income-tax liability above a defined threshold. Relevant provisions under the income Tax Act, 1961 to be prescribed.

Direct Tax

Customs Duty

• No change in general rate of Customs duty

• Full exemption to HIV/ AIDS drugs and diagnostic kits imported under National AIDS Control Programme (NACP) funded by the Global Fund to Fight AIDS, TB and Malaria (GFATM);

• Provision for refund of Customs duty paid at the time of import of scientific and technical instruments, apparatus, etc. by public funded and other research institutions;

• CVD exemption to x-ray machines is withdrawn

Indirect Tax

Excise Duty• No change in general rate of Excise duty

• Full exemption to DDT manufactured by Hindustan Insecticides Limited for supply to theNational Vector Borne Diseases Control Programme (NVBDCP)

• Full exemption for HIV/AIDS drugs and diagnostic kits supplied under National AIDS ControlProgramme (NACP) funded by the Global Fund to Fight AIDS, TB and Malaria (GFATM);

• Reduced Excise duty for RO membrane element for water treatment other than household typefilters and full exemption to other RO membranes for water treatment

Service Tax

• No change in general rate of Service tax

• Exemption to services by way of technical testing or analysis of newly developed drugs,including vaccines and herbal remedies on human participation by a clinical researchorganization is withdrawn;

• Exemption to services of:

Treatment, disposal or incidental processes by common bio-medical waste treatmentfacility for treatment or disposal;

Employee’s State Insurance Corporation for a period prior to 1 July 2012;

Life micro-insurance schemes approved by IRDA not exceeding INR 50,000

• The long awaited amendment for providing infrastructure status to the healthcare sector remainsuntouched by the Finance Minister.

• No provision for liberalizing section 35AD to include the hospital with less than 100 beds.

• Deduction of profits linked to investments to the companies engaged in Pharma R&D and Contractmanufacturing finds no place in the Union Budget

• No tax incentive to boost the investment in the manufacture of medical devices.Unfinished

Agenda