The government is unlikely to introduce a health cess in the coming Budget to provide health coverage to the below poverty line families, despite pressure from some political quarters within the United Progressive Alliance.
Union Chemical and Fertilisers Minister Ram Vilas Paswan has proposed a 2 per cent health cess under the new drug policy to provide medical support to over 22 crore (220 million) people living below poverty line.
Finance Minister P Chidambaram is not in favour of a health cess and may rather prefer to increase budgetary support for the health sector in view of the buoyancy in the revenue collections, official sources said.
The ministry has also asked the health ministry to utilise the available sources in an efficient manner.
Officials from North Block said that levying another cess would not go down well with the corporate sector and middle class tax payers, who are already burdened with a 2 per cent education cess, a road cess and tobacco cess among others.
With annual inflation rate touching 6.58 per cent and surge in prices of essential commodities by over 10 per cent within months, Finance Ministry is under attack from some quarters of the Congress Party and allies of the UPA.
"Health cess can be considered only if there are last minute directions from the Prime Minister's Office, which is highly unlikely considering Prime Minister Manmohan Singh has himself favoured lowering of tax burden," a senior finance ministry official added.
The chemical ministry has said that through 2 per cent health cess, the government could raise about Rs 6,000 crore (Rs 60 billion) for funding insurance schemes for BPL families. Some NGOs and allies of the UPA have also supported the cess to raise funds for the health sector.
They have urged the government to introduce cess for spending money, primarily on schemes meant for the poor people and to fund supply of anti-cancer medicines through the Rashtriya Swasthya Bima Yojana.
Currently, less than 1 per cent of GDP is being spent on health and as per the National Common Minimum Programme this has to be raised to 2 to 3 per cent of GDP.
Meanwhile, opposing the proposal of health cess, industrial bodies said that government should consider high administrative costs for the corporate and finance ministry before introducing a new cess.
At a time, when Indian industry is already over-taxed in comparison to other competing economies, a new tax would affect the competitiveness of Indian manufacturers and service sector, industrial chambers believe.
Sources said finance ministry is broadly in agreement with the views of industry, which is opposing the health cess.
