Budget 2019: Here is what India’s domestic medical device industry expects

Listing its expectations from the union budget 2019-20, the Association of Indian Medical Device Industry has asked the government to address India’s 70% to 90% import dependence on medical devices and make India a global manufacturing hub under Make in India

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New Delhi: Applauding the union government’s achievements during the year 2018, Mr Rajiv Nath, Forum Coordinator, Association of Indian Medical Device Industry (AiMeD) mentioned, “Even though the year 2018 witnessed significant developments like creation of National Medical Devices Promotion Council in the medical devices sector and establishment of Andhra Medtech Zone at Vizag, there is an urgent need for the government to accelerate further reforms and supportive measures  in the year 2019 in order to make India a global medical device manufacturing hub.”

“To reduce huge import dependency in this sector which is still at 70-90%, minimizing outgo of foreign reserves, and making quality healthcare affordable and accessible to the masses at large,” Mr Nath added further in a statement to the press.

Union minister of state for health and family welfare, Mr Ashwini Kumar Choubey during the recent WHO global conference on medical devices in Visakhapatnam announced that the Central government is actively considering a proposal to increase custom duty on medical devices by 15-20% to promote indigenous manufacture of medical devices.

Recommendations:

  • Reasonable Tariff Protectionfor enabling Make in India: To promote domestic medical device industry that will subsequently reduce India’s heavy reliance on import the Current Basic Import Tariff of 0-7.5% needs to be over 15% for Medical Device (the Bound Rate under WTO is 40% Duty) and Concessional Duty on Raw Material may be retained at 2.5% for now, for Next 3 Years. After GST, imported Devices are cheaper by 11% and at times we are unable to compete with Chinese import in Government Tenders. In other Countries like Iran as soon as a Factory is put up, they support Domestic Product with import restrictions and Duty protection.

  • Level playing Field for Domestic Manufacturers:If government can boost manufacturing of mobile phone & consumer electronics by levying 15% to 20% duty and for automotive, bicycles & motorcycles, we request for medical device, which is even more important similar tariff protection clauses. Unless the Indian manufacturers get level playing field and visible benefit to manufacture in India in comparison to the imports, nobody will venture out to this tedious job of putting together men, machine and capital for manufacturing of medical device in India to make quality healthcare affordable to common masses which is a dream and mission of Prime Minister Narendra Modi.

  • The heavily import dependent medical device sector got a huge shock after implementation of Goods & Services Tax (GST). Earlier, the domestic manufacturers were getting CENVAT input credit (6.45% CVD+ education cess & 4.57% SAD+education cess) on the basis of manufacture and traders/importers were not getting CENVAT input credit. In GST regime, there was no difference between manufacturer and trader/importer. Simply, anybody whether he is a manufacturer or trader/importer, can get GST input credit on the basis of supply. Comparatively, trader/importer became beneficial to the extent of 11% and the manufacturer did not get this advantage and loss further competitiveness to imports. This is nothing but further disenchantment to the manufacturer for manufacturing medical device in India.

  • If we compare other large developing countries, i.e., BRICS countries, we will find that India is possibly levying the lowest import duty on medical devices.

BRICS Countries Taxation :-

Taxation on Medical Devices (HS Code 9018) in BRICS countries

Duty / Tax

Brazil

Russia

India

China

South Africa

Import Duty

14%

0% to 15%

0% to 7.5%

3.3% to 4%

0% to 20%

VAT/ Sales Tax/ GST

17%

NIL

12%

17%

14%

Earlier Department of Pharmaceuticals (DoP) had consented to AiMed’s tariff rationalization proposal and forwarded the same to department of revenue for consideration. In budget (Finance Bill) the custom duty was increased from 7.5% to 10% but same day in the evening, the notification stated it at 7.5%.

“We were informed by DoP & department of Industrial Policy & Promotion that department of revenue is awaiting clarification/response from Union health ministry to DoP’s proposal. With the health ministry assurance of actively considering our tariff rationalization proposal, we expect a positive response,” Mr Nath added. Until we have a robust domestic industry, patients in India will not have access to low cost affordable stable priced medical devices.


*This news is based on a press release.