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MTaI bats for conducive tax environment to make quality medical devices affordable
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Arun Sreenivasan, New Delhi
January 23 , 2019
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Medical Technology Association of India (MTaI), which represents leading
research-based medical technology companies, said the government should
streamline tax and duty structure in Union budget 2019-20 to ensure
people get long-term access to quality medical devices.
Since
2017, the government has taken various measures to curb the price of
medical devices. Price ceiling has been imposed on devices like stents
and knee implants, while only a limited 10% annual price increase is
allowed for other ‘non-scheduled’ products. This is so, irrespective of
cost challenges the manufacturers encounter during the year. In addition
to this, the dual effect of weakening of currency and inflationary
trends has created an extraordinary situation and the medical device
companies are finding it difficult to sustain the supply of medical
devices in the present situation.
Meanwhile, the high custom
duties levied on medical devices have created a cascading incremental
effect on the landed cost of medical devices and is a major concern for
the medical device industry. Approximately 70% of medical devices are
imported into India to meet the rising demand for quality healthcare.
“We
are in a constant dialogue with the government on price control which
we feel hampers technology innovation in the medtech industry, and will
continue providing suggestions for a sustainable solution. There are
several other concerns that threaten affordability and patient
accessibility to quality and the latest technology in medical devices,”
MTaI chairman and director general Pavan Choudary said.
“The high
custom 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 the Ayushman Bharat programme
(PMJAY). We seek reduction of custom duties to 2.5% including all
surcharges,” the association said in a statement.
According to
MTaI, 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. China,
which has near self-sufficiency in segments like consumables, had
reduced custom duties from 4% to 3.3% to avoid the problem of smuggling
and to inject competition in the sector.
Regarding customs duty
and GST on spare parts of medical equipment, the group says they are
currently charged at a higher rate than the equipment itself. For
example, heart lung machine attracts basic custom duty of 7.5% and GST
of 12% whereas its spare parts like roller pump attracts basic customs
duty of 10% and GST of 18%. Similarly, GST on contact lenses is 12%,
whereas the contact lens solution which is the essential part of using
contact lenses attract 18% GST. MTaI recommends the same customs duty
and GST on spare parts and medical equipment.
The association
calls for tax holiday to medical device R&D centres under the
Transfer Pricing Act to boost investment in setting up in-house R&D
capabilities. It also urges the government to reduce minimum alternative
tax (MAT) rate to 15% from the present effective rate of 21.34%,
including surcharge and education cess.
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