Govt may hike custom duty on medical devices by 15-20% to boost indigenous production

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The Central government is actively considering a proposal to increase custom duty on medical devices by 15-20% to promote indigenous manufacture of medical devices.

The announcement to this effect was made by Union minister of state for health and family welfare Ashwini Kumar Choubey at global conference on medical devices in Visakhapatnam recently.

At present the domestic medical device industry is suffering from the onslaught of cheap imports from the countries like China who subsidises their export by 17% through various means. The existing manufacturers are converting into importer/trader as they find it cheaper to import than manufacture in India with lots of other hassles.

India which is the fourth largest market in Asia after Japan, China and South Korea is predominantly import driven accounting for 65 per cent of the total market and approximately 80 per cent of import of medical electronics, hospital equipments, surgical instruments, implants, diagnostic reagents. Requirement of high end medical devices is met by multinational companies.

The heavily import dependent medical device sector got a huge shock after implementation of Goods & Services Tax (GST). Earlier, the domestic manufacturers were getting CENVAT input credit (6.45% CVD+ education cess & 4.57% SAD+education cess) on the basis of manufacture and traders/importers were not getting CENVAT input credit. In GST regime, there was no difference between manufacturer and trader/importer. Simply, anybody whether he is a manufacturer or trader/importer, can get GST input credit on the basis of supply. Comparatively, trader/importer became beneficial to the extent of 11% and the manufacturer got financial disincentive to this 11%. This is nothing but further disenchantment to the manufacturer for manufacturing medical device in India.

To promote local medical device industry that will subsequently reduce India’s heavy reliance on import, Association of Indian Medical Device Industry (AiMeD) had sought reasonable tariff protection. The Association has suggested that current basic import tariff of 0% to 7.5% needs to be raised to 15% for medical devices and on their components to be 5%, next year 7.5%. Now the Union health ministry is seriously looking into its suggestion.

Unless the Indian manufacturers get level playing field and visible benefit to manufacture in India in comparison to the imports, nobody will venture into this tedious job of putting together men, machine and capital for manufacturing of medical device in India, which is a dream and mission of Prime Minister. “If government can boost manufacturing of mobile phone & consumer electronics by levying 20% to 15% duty and for automotive, bicycles & motorcycles, we request for medical device, similar tariff protection clauses”, said Rajiv Nath, forum coordinator, AiMed.

Rajiv Nath said “If we compare other large developing countries, i.e., BRICS Countries, we will find that India is levying the lowest import duty. Though, in theory, China levies less import duty, but puts very high non-tariff barriers that none of the countries including India can effectively export medical devices to China, whereas India is one of the most liberal countries in the world for imports of medical devices with very low tariffs and virtually nonexistent no tariff barrier. In fact, India puts non-tariff barriers for its own Indian manufacturers for exports by not permitting free sale certificate by Union health ministry or in the form of USFDA mandatory regulatory approval clause in government bids.”

Earlier Department of Pharmaceuticals (DoP) had consented to AiMed’s tariff rationalization proposal and forwarded the same to department of revenue. In budget (Finance Bill) the custom duty was increased from 7.5% to 10% but same day in the evening, the notification stated at 7.5%.

“We were informed by DoP & department of Industrial Policy & Promotion that department of revenue is awaiting clarification/response from Union health ministry to DoP’s proposal. With the health ministry actively considering our tariff rationalization proposal, we expect a positive response,” he added.

Source: 1

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