New Delhi: Finance Minister Pranab Mukherjee on Tuesday announced the withdrawal of the proposed 5 per cent Service Tax on both air-conditioned hospitals with more than 25 beds and diagnostic services.

Providing some relief to readymade garment manufacturers, he raised the abatement available for levy of taxes on retail price of some of the branded garments and textile made-ups.

Mukherjee, while moving the Finance Bill in the Lok Sabha for consideration and passage said, "The purpose of the new levy (healthcare) was not merely to mobilise revenue, but also 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.

Both these proposals, mooted by the Minister as part of the budget for 2011-12 on February 28, had evoked sharp reaction from the interest groups.

The garment traders had condemned the proposed 10 per cent excise duty on readymade garments saying it would hurt the small business.

Under the revised norms, 10 per cent excise would be levied on 45 per cent of the tariff value of retail price on branded readymade garments as against 60 per cent proposed in the original budget proposal.

Mukherjee, however, retained his proposal to extend 18.5 per cent Minimum Alternate Tax (MAT) on SEZ developers and units.

With regard to the proposal to reduce basic customs duty on raw silk from 35 percent to 5 per cent, the Minister said it was aimed at augmenting the supply to weavers in both handloom and the powerloom sector.

Mukherjee had earlier in the day tabled the Banking Law Amendment Bill 2011 and the Constitutional Amendment Bill for introduction of Goods and Services tax (GST).