Increased GST on medtech means higher medical costs for patients: MTaI

New Delhi: The Medical Technology Association of India (MTaI) has welcomed the concept of Goods and Services Tax (GST) and congratulated the Government for finally taking this much-awaited step.

“The healthcare sector, that MTaI members contribute to, is a key priority of the Government in terms of service quality and reach. India spends just about 1.3% of the GDP on healthcare, and 70% of the healthcare spending in the country is out-of-pocket. The Government has implemented several measures to keep these services affordable to the common man,” stated the Association’s statement released to press on evening of 17th July 2017.

However, the MTaI raised its fears on the increase in the medical costs due to uneven GST rates. “The current GST dispensation for healthcare that keeps the hospital services exempt from GST (which also means that the hospitals will not be able to avail input tax credit) and fixes rates that range from 5%-28% on medical devices will do little to lower the existing medical costs for the common man. In line with our earlier recommendation, it would have helped if the medical services were zero-rated, similar to exports, where full tax credit against inputs would be refundable, and all devices were taxed at a standard rate of 5% GST.”

“A lower and uniform GST rate of 5%, when combined with the anti-profiteering law would have helped to bring down the cost of medical service to patients, and also attract investments to the sector and expand reach”

The statement mentioned further, “On the contrary, many medical devices have seen higher GST rates than the embedded tax earlier. The increase ranges from about 1.5% (for devices attracting 6% CVD earlier) to 4.5% (for devices under nil CVD). Besides, the maintenance cost of the Capital Equipment went up by 3%, owing to increase in GST to 18% vs previous Service Tax rate of 15%. There was an across-the-board increase in custom duties board in early 2016 as well. A successive increase in GST will force the suppliers to raise prices of devices. This will only add to the cost of medical services. A lower and uniform GST rate of 5%, when combined with the anti-profiteering law would have helped to bring down the cost of medical service to patients, and also attract investments to the sector and expand reach.”

MTaI says it had already made these and several other recommendations to the government before, to address issues of the industry.

Through the statement, the MTaI reiterated that the transition issue related to input tax credit on opening stocks, where the government needs to appreciate the genuine concerns of the industry and provide relief, as some of these are causing financial losses owing to non-availability of credit. Provisions such as restricting the credit on opening stocks for one-year period and allowing the same when sold within six months is a case-in-point. Medical devices are under service and support obligations post installation and it is critical to ensure the availability of spare parts for 8-10 years. This at times requires the suppliers to keep inventory for more than one year.

The current presumptive credit of 40%/60% is very low compared to taxes actually paid on transition stocks. It would have been better to include all devices under the rules laid down for credit transfer document, as these currently cover items costing more than Rs.25000 per unit, stated MTaI.

“GST should support ease-of-doing business, reduce cost of compliance and provide entrepreneurial impetus. We, at MTaI, look forward to an inclusive approach by the Government to help make this more relevant for the healthcare sector, and welcome any initiative to work together in addressing initial issues such as those highlighted above,” the statement concluded.