Budget FY24 recommendations: MedTech seek GST cut to battle imports from China, US

Faced with a surge in imports from countries such as China, the US and Germany, medical device makers in the country have sought focused government backing in the form of size-specific financial incentives and policy support in the upcoming Union Budget.

The Association of Medical Device Industry wants a flat 12 percent goods and services tax (GST) rate for all medical devices instead of the 18 percent rate applicable on some medical devices currently.

“Also reducing GST to 5 percent is making Indian products non-competitive to imports as then manufacturers are unable to keep reduced ex-factory prices based on lower input costs net of GST,” it said while demanding that the basic customs duty on import of these devices should be raised to at least 10 to 15 percent from current 0-7.5 percent currently.

The association, based on the government figures, had last year highlighted that the medical devices imports in the country had grown 41 per cent to Rs 63,200 crore in 2021-22 over Rs 44,708 crore in the previous fiscal.

The statistics showed that China remained the top source as medical device imports from the country grew 48 per cent to Rs 13,538 crore in 2021-22 from Rs 9,112 crore in 2020-21.

Imports from the US also increased steeply by 48 per cent to Rs 10,245 crore in 2021-22 while the value of medical device influx from China was nearly the same as the combined value of imports from Germany, Singapore and the Netherlands in the last fiscal.

“It has led to domestic industry players shutting shop as the local industry cannot compete with cheaper Chinese imports,” said Rajiv Nath of AiMeD. “This is a lost opportunity for Indian manufacturers to grow and compete globally but saw with dismay dumping of Chinese imports when duties were slashed to zero percent.”

Tweak existing systems
Pavan Choudary, chairman & director general of the Medical Technology Association of India (MTAI) said the industry expects a significant increase in healthcare expenditure which will go a long way in bridging current gaps as well as in creating an increased demand for the industry’s growth.

“We also hope that Union Budget 2023 gives a fillip to MSMEs in this space by tweaking existing systems to simplify taxation and credit lending, and by offering incentives to those who choose to invest in these small and medium businesses,” he said.

Industry insiders say the Indian medical devices industry has the potential to reach $50 billion by 2030 but for this, it needs encouragement from the government to be self-reliant and sustainable in the long term to address the national healthcare security needs exposed by Covid-19.

Ensure universal healthcare access
Some experts feel that the introduction of health insurance to ensure universal healthcare access will increase the demand for medical devices over a period of time.

“It is important to protect the manufacturing base of India but at the same time, since India relies heavily on the import of medical devices, this needs to be balanced so as to continue to have access to advanced medical equipment,” said Shuchi Ray, partner, Deloitte India.

Raajiv Singhal, founding member, managing director & chief executive of Marengo Asia Healthcare said that reliance on imported medical technologies often leads to excessive cost burden in treating certain diseases.

Therefore, he said, there is a dire need for enhanced investment in homegrown medical devices and technologies.

Singhal also pitched for initiating more public-private partnerships, encouraging Indian scientists and businesses to develop more improved medical technologies and devices. He said early-stage venture capital funds should help the country’s numerous indigenous innovators and start-ups. Moneycontrol