GST to replace 8 taxes imposed on healthcare & pharma: Dr GSK Velu

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The Union government’s Goods and Services Tax (GST) will reform the taxation structure since eight different types of taxes are imposed on the healthcare and pharmaceutical industry at present. An amalgamation of all these taxes into one uniform tax will ease the process of operating businesses in the country by simplifying administration and enforcement since there is no double taxation.

India will finally see the realization of the much discussed GST from July 1, 2017. To ensure the benefits of lower GST on medical devices, the Centre recently stated calculations on how the burden of indirect taxes will reduce in the new regime. It is expected that GST would have a positive and productive effect on the healthcare industry, said Dr. GSK Velu, Chairman & Managing Director, Trivitron Healthcare.

The first cut for the medical devices highlights that it is placed in the zero, 5%, 12% and 18% categories. All the medical devices including implantable devices, diagnostics equipment, and other devices should be put under the same category of 12% to provide a level-playing field. In-vitro diagnostics, analyzers and hospital infrastructure like operation theatre tables, beds and dentist chairs, hospital bed sheets and sanitary articles including sanitary napkins are placed at 18% GST rate. Now this is a concern, as all these commonly required medical and healthcare products should also have been placed at a lower slab, said Dr. Velu.

For the manufacturers in India, 12% ought to be competitive against imports in most of the cases. Most medical devices including consumables and disposables are pegged at 12% while some at 5%.  Further, medical devices, including surgical instruments, will see a lower tax burden with the GST rate pegged at 12% instead of the current incidence of over 13%, which includes 6% central excise duty and 5% VAT. There is also a provision in GST rules against excessive profit and the manufacturer is supposed to pass on the cost-saving benefit to the consumer by reducing the MRP, he said.

It needs to be seen how GST will pan out on products from the tax-free zones; as such a reduction would have helped in reducing the prices of the medicine and creating a positive impact on the patients. The prices for most medical devices will not increase for hospitals and retailers in supply chain under the GST for those slated at 12%. The ones who will gain with reduced cost of procurement will be the last in supply chain, that is, hospital/ retailers, said Dr. Velu.

To be precise, 12% is better as at 5% one is unable to claim modified VAT/GST set off on all the inputs especially for services as it has excess GST in ledger versus the GST charged to the clients. Imports will become cheaper in GST as earlier CVD (Countervailing Duty) could not be set off against VAT. Hence it is better to peg all medical devices at 12% for the benefit of all, he said.

Source: 1


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