Medical device makers ask for extending ITC on services, capital goods

Industry body Aimed says proposed balanced reforms could help reduce healthcare costs for consumers

Domestic medical device manufacturers’ lobby has asked the Centre to introduce additional reforms in the Goods and Services Tax (GST), such as simplified refund processes and inclusion of input tax credit (ITC) on services.

 

The Association of Indian Medical Device Industry (Aimed) on Tuesday submitted a list of recommendations to the Union finance ministry to address persisting challenges such as working capital stress, inverted duty structures, and restricted refund eligibility.

 

This includes simplification of the GST refund mechanism by extending refund eligibility to input tax credit (ITC) on services and capital goods, which are currently excluded.

 

Commenting on the matter, Rajiv Nath, forum coordinator for Aimed, said that global best practices in countries such as Australia, Canada, and the European Union (EU) allow full refund or carry forward of unused GST or value-added tax (VAT) paid on inputs, including services, so that exporters and businesses with inverted duty structures do not suffer cash flow blockages or tax cascading.

 

“India must adopt similar reforms if we want to lower healthcare costs, strengthen Make in India, and improve global competitiveness,” he added.

 

Similarly, the industry body also recommended a uniform 5 per cent GST rate on all components and raw materials used as inputs in medical device manufacturing to permanently eliminate inverted duty structure issues.

 

Among other recommendations were inclusion of ITC on services, capital goods, and closing inventory in the refund formula and introduction of a provisional 90 per cent refund within strict timelines, easing liquidity for manufacturers.

 

The representation comes even as the device makers’ body welcomed the overall reduction of GST on medical devices to 5 per cent and the decision to refund 90 per cent of accumulated credit within seven days.

 

Aimed added that the proposed reforms could help reduce healthcare costs for consumers and bring India’s tax system in line with global best practices.

 

“At the same time, these reforms are expected to make Indian manufacturers more globally competitive,” it said.