New Delhi, March 22 (IANS) Faced with criticism from the opposition and the medical fraternity, Finance Minister Pranab Mukherjee Tuesday rolled back the proposed five percent service tax on healthcare announced during the federal budget for 2011-12.

"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 test until GST (Goods and Services Tax) comes into force," Mukherjee said in the Lok Sabha.

In the federal budget for 2011-12, the finance minister had proposed to levy five percent tax on services provided by hospitals with 25 or more beds that have facility of central air-conditioning and on diagnostic tests of all kinds.

"The purpose of the new levy was not merely to mobilise revenue it was to pave the way for introduction of goods and services tax," Mukherjee said while replying to a debate in the lower house of parliament.

The medical fraternity, union health ministry and opposition had been demanding roll back of the levy saying it would make healthcare unaffordable for the low income people.