Medical device sector to feel the GST sting

GSTMUMBAI: While country’s biggest tax reform is on the verge to take its legislative birth, the medical device industry is expects feel the tax heat in the Goods and Services Tax (GST) regime.
In the current scenario when India is facing double digit medical inflation, GST will have cascading effect on the sector, which will trigger in a higher cost burden on patients, said Sanjay Bhutani, Board Member of Medical Technology Association of India.
While speaking to BT, Bhutani said: “The medical device sector is like to brace for unreasonable tax load due to the proposed GST rates, thereby sparking off higher cost burden on patients across India.”
In India, there is a sizeable spending on healthcare, and any further increase the tax structure in the GST will have cascading effect on the low and the middle income strata of the society, he said.
In the current indirect tax regime, the embedded tax works out to be approximately 7.5 percent and 10.7 percent. It is after taking in account countervailing duty, value added tax (VAT), Octroi, central sales tax, and entry tax, to name a few. During the GST regime, the rate is said to be pegged at 12 percent.
According to statistics, Indian pharma industry is valued at about $35 billion, whereas medical device sector is $7 billion and account for 20 percent of the overall industry size.
“We had expected that the tax burden would peter out with the introduction of GST, and the uniform indirect tax regime would encompass all the taxes. However, contrary to our belief, medical devices comprising surgical instruments will approximately fuel an additional tax burden of 4.5 percent to 1.3 percent,” said Bhutani.
Meanwhile, healthcare costs are escalating across the globe. In India, where 50 percent of the population lives below the poverty line, rising costs will make basic medical care almost unaffordable, even for the middle class. It’s a high time that BJP government descents from the ivory tower.