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AiMeD opposes GST exemption on medical devices, suggests MRP cap formula

The Association of Indian Medical Device Industry (AiMeD) has opposed GST exemption on Medical Devices as it is counterproductive and anti Make in India.

In this regard, Rajiv Nath, Forum Coordinator, AiMeD, wrote a letter to Smt. Nirmala Sitharaman, Chairperson, GST Council of India & Hon’ble Minister of Finance requesting that Medical Devices used for COVID-19 prevention and treatment like hand sanitisers, face masks, PPE Kits, oximeters, ventilators, etc. should not be fully exempted from GST levy.

Otherwise, cost of manufacturing of these items will be increased to the extent of any GST (Input Tax) paid on purchases of the raw materials and services for the furtherance of the business, as Input Tax Credit (ITC) is not available against exempted supplies and makes the domestic product more expensive and less competitive against imports.

For 40 Medical Devices listed having the GST rate of 18% (e.g. Thermometers, hot water bottles, laboratory instruments)needs to be reduced to 12% as these are not luxury goods but needed for healthcare.However we at AiMeD are opposed to a call by importers and health care providers lobby seeking full exemption of GST for Covid related Medical Devices. It’s counterproductive and anti Makein India as it reduces the Global competitiveness of Indian manufactured Medical Devices as then Indian manufacturers would need to increase ex Factory prices as they would be unable to set off their GST paid on their input procurement to their outputs sales. Imports on other hand would become 12 % cheaper. Historically no importers had provided evidence that they reduced the MRP when GST or Excise Duty as earlier on their products was reduced.

Mr. Nath further emphasized that Medical Devices are 85% import dependent even after 73 years of our Independence. Due to Atmanirbhar Bharat Abhiyan by our Hon’ble Prime Minister and subsequent some favorable domestic manufacturing encouragement policies of the Government, the domestic manufacturers stepped forward to make India self-reliant on Medical Devices. The Importers lobby is very strongly pushing their agenda of constantly seeking exemption of Custom Duty & GST to reduce their import costs and this has historically discouraged domestic manufacturing and resulted in over dependence on Imports.

India imports over Rs. 42000 Cr of Medical Devices and is already import dependent due to very low custom import duties only up to 7.5 % .

Covid has shown that when imports get disrupted then India needs to bank upon homegrown medical devices so all policies should be made to make India Atmanirbhar & not more import dependent by appeasing importers lobby.

If Tax authorities want to protect consumers interest then capping of MRP to 2-3 times over import landed CIF price or EX – Factory prices for domestic manufacturers would be more impactful rather than reducing GST and result in immediate direct benefits as in many cases the MRP is artificially inflated 10-20 times of Import Landed Price in a skewed market place. Price of such Medical Devices could fall by over 50%, he claimed.

Mr. Nath on behalf of the domestic Medical Device industry sought favorable support of Smt. Nirmala Sitharaman to end India’s huge import dependency to boost Atmanirbhar Bharat Abhiyan & Make in India initiatives of PM Modi.
MB Bureau