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GST to replace 8 taxes imposed on healthcare & pharma: Dr GSK Velu
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Nandita Vijay, Bengaluru
June 01 , 2017
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The Union government’s Goods and Services Tax (GST) will reform the
taxation structure since eight different types of taxes are imposed on
the healthcare and pharmaceutical industry at present. An amalgamation
of all these taxes into one uniform tax will ease the process of
operating businesses in the country by simplifying administration and
enforcement since there is no double taxation.
India will finally
see the realization of the much discussed GST from July 1, 2017. To
ensure the benefits of lower GST on medical devices, the Centre recently
stated calculations on how the burden of indirect taxes will reduce in
the new regime. It is expected that GST would have a positive and
productive effect on the healthcare industry, said Dr. GSK Velu,
Chairman & Managing Director, Trivitron Healthcare.
The first
cut for the medical devices highlights that it is placed in the zero,
5%, 12% and 18% categories. All the medical devices including
implantable devices, diagnostics equipment, and other devices should be
put under the same category of 12% to provide a level-playing field.
In-vitro diagnostics, analyzers and hospital infrastructure like
operation theatre tables, beds and dentist chairs, hospital bed sheets
and sanitary articles including sanitary napkins are placed at 18% GST
rate. Now this is a concern, as all these commonly required medical and
healthcare products should also have been placed at a lower slab, said
Dr. Velu.
For the manufacturers in India, 12% ought to be
competitive against imports in most of the cases. Most medical devices
including consumables and disposables are pegged at 12% while some at
5%. Further, medical devices, including surgical instruments, will see a
lower tax burden with the GST rate pegged at 12% instead of the current
incidence of over 13%, which includes 6% central excise duty and 5%
VAT. There is also a provision in GST rules against excessive profit and
the manufacturer is supposed to pass on the cost-saving benefit to the
consumer by reducing the MRP, he said.
It needs to be seen how
GST will pan out on products from the tax-free zones; as such a
reduction would have helped in reducing the prices of the medicine and
creating a positive impact on the patients. The prices for most medical
devices will not increase for hospitals and retailers in supply chain
under the GST for those slated at 12%. The ones who will gain with
reduced cost of procurement will be the last in supply chain, that is,
hospital/ retailers, said Dr. Velu.
To be precise, 12% is better
as at 5% one is unable to claim modified VAT/GST set off on all the
inputs especially for services as it has excess GST in ledger versus the
GST charged to the clients. Imports will become cheaper in GST as
earlier CVD (Countervailing Duty) could not be set off against VAT.
Hence it is better to peg all medical devices at 12% for the benefit of
all, he said.
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