Competitiveness may be hit on GST rejig: Medical devices industry

AIMED said GST changes could hurt domestic medtech competitiveness and tilt the market towards imports, urging balanced tax slabs, refund reforms, and a higher Health Cess

India’s medical devices industry has flagged that a blanket rejig of goods and services tax (GST) rates could impact domestic competitiveness for the segment, tilting the market in favour of cheap imports.

 

The Association of Indian Medical Device Industry (AIMED) noted that the proposed GST changes to either 5 per cent or 18 per cent present significant risks, requiring careful consideration.

 

The body said that reducing GST to 5 per cent would enhance affordability and market reach for equipment, electronics, reagents and implants.

 

However the same rates for low-margin consumables, such as syringes, catheters and intravenous (IV) sets would worsen the inverted duty structure, where inputs are taxed at 18 per cent and outputs at 5 or 12 per cent leading to margin pressure and supply risks.

 

“Raising GST to 18 per cent would increase medical device costs for hospitals and households, while a flat 5 per cent GST without refund reforms may create supply risks by discouraging local production,” Rajiv Nath, forum coordinator for AIMED, said.

 

He added that retaining 12 per cent GST for most consumables while allowing 5 per cent for high-value equipment seems to be the most balanced approach.

 

The body suggested streamlining of GST refunds and allowing refunds on input services and capital goods to improve cash flow and competitiveness.

 

To counteract the pricing advantage of imports, AIMED proposed increasing the health cess on imported devices from 5 per cent to 10 per cent, with proceeds earmarked for Ayushman Bharat.

 

“Indian manufacturers already face a 15 per cent cost disability against imports from China and Asean countries,” Nath said.

 

He added that a calibrated GST structure can simultaneously promote affordability for patients, protect consumer interests, strengthen domestic manufacturing and align with the government’s vision of Atmanirbhar Bharat.