MTaI Urges Govt To Streamline Taxes And Duties To Make Medical Devices Affordable

Mumbai, 9 Jan 2020:

The Medical Technology Association of India (MTaI) has recommended to the Union finance ministry to streamline tax and duty structure in Union Budget 2020-2021 to ensure people get access to quality medical devices.

It has raised issues related to high customs duties which has adversely impacted the cost of products in India contradicting government’s efforts to provide low cost healthcare available through AB-PMJAY.

“This is particularly concerning since more than 70 per cent of the demand for medical devices is being met by global innovators. We seek reduction of customs duties (at the minimum, bring down to 2.5 per cent) at the earliest to affect the margins lost due to currency depreciation. The INR depreciation, combined with the high customs duty rate has already increased the cost to the patients, making it harder for them to have access to quality medical devices,” said Sanjay Bhutani, director, MTaI.

Additionally, since the custom duty regime on most medical devices in neighboring countries of Nepal, Bangladesh, Sri Lanka and Bhutan is lower than in India, the duty differential could lead to smuggling of low-bulk-high-value devices, it suggested. This will result in not only loss of revenue for the government but also the patient will get products which are not backed by adequate legal and service guarantees.

The recently hiked customs duties on IVDs (from 10 per cent to 30 per cent) that are imported from USA is also likely to have an impact on accessibility and affordability of diagnostics services in India.

India imports 60 per cent of its diagnostics, most of which include tech intensive testing methodologies such as molecular testing etc. which serve the priority diseases like HIV, hepatitis, cancer markers among others and are not domestically produced. Increasing customs duty of such preventive tests for critical diseases like cancer and HIV will severely affect the accessibility to affordable healthcare.

It also suggested that GST should not be charged on free goods and samples of healthcare products as it is needed to promote expansion of healthcare sector through reduced costs improving patient accessibility.

Again, GST on medical devices is taxed at 12 per cent. It should be brought at par with preferential products and taxed at lower rate of 5 %. Besides this, spare parts which are to be used for medical equipment should be charged at the same rate of customs duty and GST.

Tax holiday should be provided to medical device R&D centres under the Transfer Pricing Act to boost investment in setting up in-house R&D capabilities. It is also required to seek tax incentives for the industry for developing global patents from India and tax deduction on income made by individuals or a company for rewards earned on patent development or patent licensing.

Healthcare services are currently exempt from GST. As a result, hospitals are not able to claim GST input. This results in higher cost of treatment for the patient. Once zero rated, hospitals will be able to avail GST credit on inputs, leading to lower healthcare services cost.

Expenditure on corporate social responsibility (CSR) is being disallowed in tax computation. CSR expenditure has been mandated under law and therefore should be claimable as tax deductible expenditure.

Currently, there are no tax benefits on export income. Export being a growth engine for the economy, it is important that efforts should be made to make it competitive in the international market. India’s export performance in the last 2 to 3 years has been on a decline which impacts the balance. Pharmabiz