MTaI Appeals for Customs Duty Reduction on Medical Devices to Enhance Affordability

Despite several efforts to streamline regulations and reduce compliance burdens, the industry still grapples with challenges affecting patient affordability.

The Medical Technology Association of India (MTaI) has called on the Finance Ministry for a reduction in customs duties on non-substitutable medical device imports. The body has asked the Ministry to address key concerns in the healthcare sector ahead of the Union Budget 2024.

It is here to note that, despite several efforts to streamline regulations and reduce compliance burdens, the industry still grapples with challenges affecting patient affordability.

Commenting on the same, Pavan Choudary, chairman of MTaI & MD, Vygon India, said, "It's heartening to see the government prioritise affordability. However, the customs duties and taxes on medical devices in India are among the world's highest and surpass those of neighbouring countries. This directly impacts patient affordability, contradicting the government's goals.’’

Highlighting that more than 80% of critical medical devices are imported, he anticipates the Union Budget 2024 addresses tariff rates corrections.

Issues Raised by MTaI

Key issues raised by MTaI for consideration in the Union Budget 2024 include:

1. Reduction of High Customs Duties

MTaI calls for reducing high customs duties to 2.5% on medical devices, especially for products where import substitution is not immediately viable. The current high customs duties hinder the government's cost-effective healthcare goals.

2. Removal of Healthcess Ad Valorem

The 5% healthcess ad valorem on imported medical devices adds to the industry's burden. MTaI proposes the elimination of this additional tax to ensure access to advanced medical equipment without escalating costs.

3. Increase in Public Health Spending

MTaI advocates for increasing public health spending to bridge the healthcare demand-supply gap. This aligns with the recommendations of the Fifteenth Finance Commission, emphasising the need for enhanced health infrastructure in Tier-II & III cities and rural areas.

4. Incentivising Skilling Initiatives

To address the shortage of skilled healthcare workers, MTaI proposes incentivising skilling initiatives, encouraging the private sector to collaborate with NSDC or HSSC, thereby promoting workforce development.

5. Expanding Coverage of Government Health Insurance Schemes

MTaI recommends expanding the coverage of government health insurance schemes to include daycare surgeries and home healthcare, aligning with advancements in medical technology that facilitate shorter hospital stays.

6. Tax Deduction at Source Clarification

MTaI seeks a clarification from CBDT to exclude equipment placement for demonstration/test use from the provisions related to tax deduction at source. The industry emphasises the importance of providing samples to doctors for training purposes without imposing unnecessary tax burdens.

7. GST on Healthcare Services

The association suggests zero-rating healthcare services instead of categorising them as "exempt”. This would enable hospitals to avail GST credit on inputs, ultimately reducing healthcare service costs for patients.

Sharing thoughts, Mr Sanjay Bhutani, director at MTaI and managing director of Bausch & Lomb, said, "At first glance, India's reliance on medical device imports may seem high, but a closer look reveals a different reality. Increased imports are driven by rising demand due to population growth, longer lifespans, and lifestyle-related diseases. Initiatives like Ayushman Bharat (PMJAY) have further fueled the demand for quality healthcare. However, high taxation through customs duty, health cess, and GST harms patients and the industry. We advocate for lowering customs duty rates to 2.5% for all medical devices."

Concerns Echoed by AiMeD

Days back, the Association of Indian Medical Devices Industry (AiMeD) also appealed to Union Finance Minister Nirmala Sitharaman for measures to boost domestic manufacturing and monitor the Maximum Retail Price (MRP) of imports, addressing the surge in medical device imports.

AiMeD expressed its concern, highlighting that imports have consistently exceeded INR 60,000 Cr for the past two years, and a further 20% increase is anticipated in the current year

As the healthcare sector eagerly anticipates the Union Budget 2024, these proposals aim to create a conducive environment for affordable and accessible healthcare in India.