#Budget2021: FICCI calls for health cess on certain low end medical equipment

Basic customs duty should be reduced to zero % to promote medical equipment, assemblies & parts manufactured in India, Import duty rationalization for raw materials, finished goods to encourage indigenous manufacturing to make affordable devices available to the patients

New Delhi: Dr Shravan Subramanyam, FICCI Medical Devices Committee and President & CEO, GE Healthcare, India and South Asia believes COVID-19 has brought into focus the glaring weaknesses in our health systems to deal with the pandemic of this size world over.
“It has also brought into centre stage the urgent need to focus on preventive and primary care and provide access to affordable tertiary and quaternary care. Given the rapid technological evolution of medical sciences, access and availability of quality and affordable medical devices are very critical. Hence, the Budget 2021 must rationalize the tax liability on the sector to promote the availability of affordable care, facilitate Make in India for Atmanirbhar Bharat and encourage exports,” Subramanyam explains.
He lists out key recommendations:
  • Introduce health cess on certain low-end medical equipment and exempt parts/spares imported for servicing & maintaining medical equipment’s:
Health cess on largely indispensable imports of Medical devices @5% are only adding to the high healthcare infrastructure cost for patients that is largely funded by out-of-pocket expenses. This is also making the healthcare industry uncompetitive for the growing medical tourism. India is still dependent on the import of quality medical devices to meet healthcare infrastructure requirements. The well-intentioned move to promote local manufacturing by making imports costlier is causing more distress to the sector as there is very low sector resilience to imports.
  • Basic Customs Duty to be reduced to zero % to promote medical equipment, assemblies & parts manufacturing in India:
Under IGCRD Rules, there is a provision to pay 2.5% of reduced basic customs duty in relation to manufacture of medical diagnostic equipment falling under 9018/9019/9022. This benefit is available with reference to BCD payable, if the raw materials/parts procured are utilized in the manufacture of the above-mentioned tariff goods. The said concessional duty has benefited the trade in setting up the manufacturing units like GE in the spirit of “Make in India” initiative. We propose that the said concessional duty of 2.5% be further reduced to ‘Zero’ to further enhance the ‘Make in India’ initiative and make it more attractive, thereby supporting the Atmanibhar initiative. This reduction will promote companies to develop new products and grow the manufacturing footprint in the country for the purpose of domestic and export sales.  This cost reduction can be passed on to hospitals, Diagnostic Centers, etc. in domestic Tier-2/Tier-3 cities and will enhance our export capabilities.
  • Import Duty Rationalization for raw materials and finished goods to encourage indigenous manufacturing for making affordable devices available to the patients:
The quality medical devices not currently available in the country must not face high duties, which will result in high cost of care and will further add burden to the healthcare economy. Therefore, import duty rationalisation must be done based on criteria like (a) products currently not manufactured in India (b) technology intensive products which require a lead time of 3 or more years to develop (c) high on investment and lower sales volumes and (d) used in diagnosis/ treatment of priority disease area (cancer, diabetes, cardiovascular disease, stroke, mortality rates etc.
  • Exports promotion:
  • Exports being the growth engine for the economy, it is important that efforts should be made to make it competitive in the international market. If we take a look at India’s export performance in the recent past, there has been a continuous decline and also impacting the balance of trade. Direct tax exemption for the export profits would attract investment to export competitive sectors and will provide impetus to the sector.