MTaI seeks streamlining of taxes & duties to make medical devices affordable
High customs duties have adversely impacted the costs of the medical devices and equipment in India which contradicts the government’s efforts to provide low cost healthcare available to masses, points out MTAI
Medical Technology Association of India (MTaI), which represents leading research-based medical technology companies with large footprint in manufacturing and training in India, said the government should streamline tax and duty structure in Union Budget 2020-2021 to ensure people get long-term access to quality medical devices.
“High customs duties have adversely impacted the costs of the medical devices and equipment in India which contradicts the government’s efforts to provide low cost healthcare available to masses through programs such as the AB-PMJAY. This is particularly concerning since more than 70% of the demand for medical devices is being met by global innovators”, said Mr. Sanjay Bhutani, Director, MTaI.
The issues which need to be addressed in the budget this year are stated in detail below:
High Customs Duties: The high customs duties have adversely impacted the costs of products in India which contradicts the government’s efforts to provide low cost healthcare available to masses through AB-PMJAY. We seek reduction of customs duties (at the minimum, bring down to 2.5%) 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.
Additionally, since the custom duty regime on most medical devices in neighbouring 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. The result will not only be loss of revenue for the government but also the patient will be beset with products which are not backed by adequate legal and service guarantees.
A quick comparison of Customs Duty in India in comparison to those in neighbouring countries of Sri Lanka, Bhutan, Bangladesh and Nepal is given below:
The recently hiked customs duties on IVDs (from 10% to 30%) that are imported from USA is also likely to have an impact on accessibility and affordability of diagnostics services in India. India imports 60% 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.
GST on medical Devices & Spare Parts: 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. GST on medical devices is taxed @12%; it should be brought at par with preferential products and taxed at lower rate of 5%. Spare parts to be used for medical equipment should be charged at the same rate of customs duty and GST.
Tax Holiday for R&D: 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. We also 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.
GST on Healthcare Services: 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 CSR: Expenditure on CSR is being disallowed in tax computation. CSR Expenditure has been mandated under law and therefore should be claimable as tax deductible expenditure.
Tax Incentives on Exports: 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 last 2-3 years has been on a decline which impacts the balance.