Sales tax exemption on supplies to charitable hospitals removed

ISLAMABAD: The federal government has proposed to remove the sales tax exemption on supplies to charitable hospitals in the Finance Bill 2024.

Explaining the Finance Bill 2024, Arshad Shehzad, a leading sales tax expert and Advocate Supreme Court stated that the government’s proposed Finance Bill eliminates entry number 166 of the Sixth Schedule of S.T.A. 1990, which means that supplies to the welfare healthcare sector will now be subject to an 18% sales tax. This change may significantly increase the operational costs of hospitals and medical treatment in Pakistan, potentially impacting the welfare hospitals and charitable institutions in the healthcare sector.

Arshad Shehzad strongly criticised the budget proposal, pointing out that the primary goal of the country’s budget is to create a balance within society by collecting taxes from the affluent class and reducing the tax burden on the underprivileged class. He emphasized that this proposal seems to be missing that principle. Furthermore, he explained that our constitution guarantees the promotion of social and economic well-being under Article 38-D, obligating the state to provide basic necessities of life, including medical relief, for all citizens.

Highlighting the role of private sectors welfare organization, Shehzad informed in Pakistan, due to limited resources, the government has struggled to provide basic healthcare services to the public. The private sector has stepped in to provide free or affordable healthcare services, serving approximately 70% of the population and consistently outperforming its public counterparts. Many private sector healthcare contributions are funded through donations, Zakat, and charity.

Shehzad serious expressed concern over the withdrawal proposal of the sales tax exemption to charitable hospital, wondering if the government intends to impose taxes on charity, donations, and Zakat spent on running these charitable hospitals? He questioned whether the government want to increase the cost of free or affordable healthcare services in Pakistan? In his opinion, if one cannot contribute to the socio-welfare activity, they should not become a part of spoiling it.

Currently, the exemption of sales tax on supplies to hospitals run by Charitable Hospitals of fifty beds or more is provided under the sixth schedule. With the elimination of this entry, essential supplies to hospitals, including equipment and consumables, are now subject to an 18% sales tax, along with a dispute of levying further 4% sales tax.

He informed the similar sort of amendment was introduced in supplementary Finance Act 2022; however, at that time after representation of the health care sector, the sanity was prevailed and government has restored this exemption.

Arshad Shehzad emphasized the critical role of health in determining human capital, stating that better health improves the efficiency and productivity of the labour force, contributing to economic growth and human welfare. He noted that governments subsidize healthcare facilities to attain more skilful, efficient, and productive human capital resources which in turn improve the GDP growth and may result in more productive activity and collection of taxes. Arshad Shehzad strongly urges the government to reconsider and revoke this proposal in the best interest of the socio-wellbeing.

Copyright Business Recorder, 2024