What the medtech sector is looking for in Budget 2023

Even as hectic activities are going on in the Union Finance Ministry in making preparations for the Union Budget for the financial year 2023-24, themedical devices industry in the country has demanded to the Central government to bring down the Goods and Services Tax (GST) to a flat 12 per cent. In its recommendation to the Union Budget for 2023-24, the Association of Indian Medical Device Industry (AiMeD), which represents the domestic medical devices industry, has also asked for more support from the government to the domestic medical devices manufacturing industry to reduce the import dependence, which is at present to the levels of 80-85 per cent. Other demands include setting up a separate department for medical devices, collecting more granular import data, etc. Rajiv Nath, forum coordinator of AiMeD, said that the industry is more than hopeful and positive that the government will act upon the request of the Indian medical devices industry for a separate Department of Medical Devices. This key strategic need has also been recommended by the Parliamentary Committee on Health. AiMeD also urged the government to consider shifting from an 8 Digit HS Code to a 10 Digit HS Code as done by USA and Europe to give more granular data for enabling better analysis and policy making.

The medical devices industry has also asked the government to protect the medical devices manufacturing base in India by increasing Basic Custom Duty on import of medical devices to at least 10 to 15 per cent from current 0-7.5 per cent duty though WTO Bound rate is mostly 40 per cent. The medical devices industry's demand is quite understandable because due to such low custom duty India is importing Rs. 63,200 crore of medical devices and is over 80 per cent import dependent. This 80 per cent can be reduced to below 30 per cent with correct policies as done for mobile phones and consumer electronics. As part of its budget recommendation, the Association also stated that instead of 18 per cent GST applicable on some medical devices that are not luxury goods, the GST needs to be a flat 12 per cent for all medical devices.

Also reducing GST to 5 per cent 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. Stressing on the need for trade margin monitoring, the Association stated that the purpose of low duty was to help consumers get affordable access to devices. This objective is not realised if consumers will be charged a high maximum retail price (MRP) of 10 to 20 times import landed price. Customs recording of MRP on Bill of Entry will assist to bring in data generation for policy making by evidence of a Trade Margin Rationalisation Policy for the manufacturer/importer so that there is a capping of maximum 4 times on the Ex-factory price and on import landed price of Indian distributor (at first point of sale viz. when GST/import duty is 1st levied on entering into the market).

Stressing on the need to reduce import dependence, the domestic medical devices industry in its recommendation to the Union Budget stated that the medical devices imports continued to grow at an alarming level of 41 per cent in the financial year 2022. India imported medical devices worth Rs 63,200 crore in 2021-22, up 41 per cent from Rs 44,708 crore in 2020-21, as per data from the Union ministry of commerce and industry. China remained the top import source for India as medical device imports from China grew 48 per cent from Rs 9,112 crore in 2020-21 to Rs 13,538 crore in 2021-22. Imports from the US also increased steeply by 48 per cent to Rs. 10,245 crore in 2021-22 from Rs 6,919 crore in 2020-21. The value of medical devices from China was nearly the same as the combined value of imports from Germany, Singapore and the Netherlands in 2021-22. It has led to domestic industry players shutting shop as the local industry cannot compete with cheaper Chinese imports.

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 per cent. The overall trade deficit with China widened to a record $72.9 billion in 2021-22. If the government implements even 70 per cent of the recommendations recently made by the Parliamentary Committee on Health, we can see a reversal on the import dependence and growth of the domestic industry which will bring in affordable wider access to medical devices leading to better healthcare delivery, the medical devices industry in its recommendation to the Union Finance Ministry said.

(The author is a freelance journalist with varied experience in different fields)