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Medical Devices sector applauds budget announcements on healthcare sector

Medical Devices sector applauds budget announcements on healthcare sector

Posted on February 8, 2024 Updated on February 5, 2024

The Medical Devices industry has welcomed the interim Union Budget 2024 lauding the measures announced in connection with the healthcare sector, but expressed hope that their demands including on customs duty would have been addressed.

Association of Indian Medical Device Industry (AiMeD), the umbrella association of Indian manufacturers of medical devices covering all types of medical devices, praised the interim Union Budget 2024 as a comprehensive continuity of the earlier roadmap for India’s ‘Atmanirbhar Bharat’.
But it also pointed out, “we await the fine print to study if Department of Pharmaceuticals’ recommendations have been addressed as seemingly the budget has fallen short of expectations for addressing the rising import graph of medical devices and soaring import bills worth over Rs 63,200 crore ($8 billion)”. The Association has requested an increase in custom duty to 10-15 percent and a predictable tariff policy to support the domestic industry.

Medical Technology Association of India (MTaI), which represents leading research-based medical technology companies with a large footprint in manufacturing and training in India, on the other hand appreciating the measures announced, said that a reduced customs duty could have helped the growth of FDI in the medical technology sector.

Rajiv Nath, Forum Coordinator, AiMeD applauded the government’s announcements including those regarding the establishment of medical colleges and the expansion of preventive vaccination and Ayushman Bharat to ASHA and Aganwadi workers. He also welcomed the port connectivity corridors and high traffic density corridors through PM Gati Shakti and the focus on Northeastern states as it will improve supply chain management and infrastructure.

The domestic medical technology industry may benefit from the budget’s focus on green growth, youth and women empowerment, and farmer centricity, which are aligned with Vision 2047, and the principle of reform, perform, and transform will ensure that India has a modular economic structure for all sections of business and society during the Kartavya Kal, enabling India to address global challenges and sustain development. The AiMeD was expecting an increase in Custom Duty to a nominal 10%-15% Duty and a predictable tariff policy, correction of Inverted Duty by levying Health Cess of 5% custom duty on balance Medical Devices (this was not earlier applied to all HS Codes), trade margin capping by monitoring MRP of Imports (if over 10 – 20 times of CIF) and income tax benefits for project investments in Medical Devices Manufacturing.

“We can only be hopeful that the fine print of the Union Budget would possibly act upon our recommendations,” said Nath. “We do hope to see in the fine print action on the assurances from various government departments to implement the National Medical Devices Policy 2023 and make it attractive and profitable to make in India rather than import into India,” he added.

Pavan Choudary, Chairman, Medical Technology Association of India (MTaI) & Managing Director, Vygon India said, “The schemes for maternal and child care which are currently in place are disparate and sometimes deficient. Bringing them under one common, standardized platform would help deliver optimal and comprehensive care throughout India”.

“While the customs duty has not gone down which was our expectation, and remains at the same level, this itself will take FDI in MedTech to a never-before high this financial year. However, if the government had reduced the customs duties, the FDI in MedTech could have taken a meteoric trajectory”, he added.

Sanjay Bhutani, Board Member, MTaI & Managing Director, Bausch & Lomb stated, “With schemes like cervical cancer vaccination for younger girls and covering Anganwadi and Asha workers under Ayushman Bharat, this budget emphasized on healthcare, especially for women, adolescents, and children. Also, the plan to increase the number of medical colleges using the existing infrastructure will surely enhance the healthcare facilities in tier 2 tier 3 cities. However, we feel if customs duty on medical devices were reduced, India would further its journey to become the global hub for medical tourism.”

“Also, we were expecting the Direct taxes and personal income taxes to go down which would have attracted more FDI and put more money in the hands of consumers, respectively”, he added.

MTaI has requested the government to reduce the high customs duties to 2.5% on medical devices, remove the 5% health cess, removal of undue complications in the tax provisions and put healthcare services under zero rated Goods and Services Tax (GST) for hospitals to avail GST credit on inputs, among others. Since the custom duty regime on most of the medical devices in many neighboring countries is lower than in India, the difference in duties created could lead to the smuggling of the 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, it said.

MTaI has also said that the 5% healthcess ad valorem imposed on imported medical devices has further compounded the burden on the industry. An additional tax threatens to not only dent the access to advanced medical equipment coming to India but will also leave patients bearing the brunt of these additional costs adding to the inflationary spiral. There is also a skill gap that needs to be addressed, it said in the pre-budget memorandum.

The measures like the fund of Rs. 1 lakh crore through a 50-year interest-free loan to promote tech-savvy growth, aiming at providing long-term financing with extended tenors and minimal to no interest rates will incentivize private sectors to significantly amplify research and innovation, particularly in emerging domains, thereby greatly benefiting the MedTech industry, said Deepak Sharma, Co-founder and CEO, MedLern, a digital learning solution for hospitals and healthcare professionals.

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