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Arun Sreenivasan, New Delhi January 23 , 2019
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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