Budget 2024: AiMeD urges 15% customs duty hike on medical devices

New Delhi: The Association of Indian Medical Device Industry (AiMeD) has submitted a pre-budget memorandum urging Finance Minister Nirmala Sitharaman to increase customs duty on medical devices to a nominal 10-15% in the upcoming Union Budget-24.

Highlighting the sector’s heavy reliance on imports, currently at 70%, AiMeD emphasized the need for a strategic shift towards enhancing domestic manufacturing capabilities, foster a more balanced trade environment.

Rajiv Nath, Forum Coordinator at AiMeD, expressed, “The imports of medical devices are consistently over Rs 61,000 crore for the last three years and regretfully this year have increased by 13 per cent to Rs 69,000 crore.” Nath underscored the importance of correcting the inverted duty structure and proposed a 5% health cess on customs duty for remaining medical devices, aligning with previous funding models for healthcare initiatives like Ayushman Bharat.

“This correction is expected to harmonise the duty structure, making it more conducive for local manufacturers to thrive and be competitive globally and locally,” stated Nath. AiMeD also advocated for trade margin capping. “By monitoring the Maximum Retail Price (MRP) of imports, the Government will curb the excessive mark-ups often seen in the market. This measure will make medical devices more affordable and accessible to the Indian populace, ultimately benefiting public health as consumers are affected not by import duty protection as much as by artificially inflated MRP of medical devices,” he said.

Referring to the National Medical Devices Policy-2023, which aims to reduce import dependency to 30% by fostering local production, Nath called for income tax benefits tailored for capital expenditure (CAPEX) and research and development (R&D) investments in the medical devices sector. Such incentives, he argued, are crucial for driving innovation and achieving self-reliance in medical technology.

Citing a report from the Global Trade Research Initiative (GTRI), Nath highlighted the potential growth of India’s medical devices industry from $12 billion to $50 billion by 2030. The report forecasts a reduction in import reliance to 35%, boosting exports to $18 billion and potentially creating 1.5 million jobs. The report says that the industry’s growth potential could surpass that of the smartphone sector due to India’s expanding health sector, projected to reach $600 billion by 2030.

AiMeD’s recommendations also align with GTRI’s suggestions to increase basic customs duty from 0-7.5% to 15-20% for non-ITA1 devices, remove Input Tax Credit for IGST on items with zero import duty, and introduce a Performance Linked Incentive scheme to enhance value-added production. 

Nath emphasized the need for the government to cease importing used or outdated medical devices, ensuring both safety and environmental protection while fostering growth in the domestic industry. “The GTRI report rightly recommends to identify and counter foreign lobby influence on industry and research reports shaping policy; encourage local procurement, ensuring domestic manufacturers compete effectively during critical situations. The potential of the Indian medical device industry can be realized through these strategic actions, contributing to economic growth, self-sufficiency, and improved healthcare services,” concluded Nath.