Over the past decade, the industry has shifted focus from the traditionally lucrative developed markets to the more promising emerging markets. A noteworthy portion of organic activities of the companies are channeled towards building resources, both capacity and people, to expand their customer base in these high growth markets. The expansion of these emerging economies, government funding and reforms, changing consumer lifestyles, increasing penetration of medical insurance products, and a rise in awareness and disposable income, has increased the demand for quality healthcare services. This, in turn, is expected to increase the demand for medical equipment and other support services. Today, the medical devices market in the BRIC countries, alone, accounts for nearly USD 10Bn and is growing at an average CAGR of 8%. Also, The India's healthcare infrastructure is lagging behind when compared with other developing countries. There exists a huge gap between demand and supply of healthcare infrastructure facilities available in the country.
Medical Technology Parks
The Creation of exclusive dedicated Medical Technology Parks where there is a cluster of manufacturers of Medical Technology products with basic infrastructure to support these and the inclusion of benefits for Customs duty on raw material, excise duty concessions, VAT holidays, IT holidays, etc. Furthermore, there is a need for R&D grants / subsidies in the Medical Technology space for promoting Domestic Innovation initiatives.
To ensure that there is thrust in the Research and Development area for design as well as innovation of these products, special incentives must be offered to get more participants in this. As benefits to the society would be very significant due to such projects, incentives in the form of Income Tax write-off for up to 250% of the value of investment for R & D and innovation of Medical Instruments, Diagnostics Instruments, Consumables, Devices, etc. should be offered.
Customs Duty
Exemption for Medical / Dental / Surgical Equipments
- Tariff barrier on imports of finished goods impacts healthcare costs because economies of scale will not permit manufacturing of all products in the country. Therefore, import of finished goods and raw materials/components should be at low customs rates.
- Customs Duty on import of finished products should be prescribed at a very low level while NIL customs duty is specified for the import of Raw Materials / Parts / Sub-Assemblies required for ultimate local manufacturing of instruments / Accessories and Consumables.
- It is requested that Nil Basic Customs Duty be specified for Medical Equipments, Medical or Surgical Implants, Medical Devices, Blood Glucose Monitoring Strips of heading 3822, Medical, Surgical or Laboratory Sterilizers and Sterile surgical catgut and similar sterile suture materials and sterile tissue adhesives for wound closure should also be exempted from customs duties.
Special CVD 4% in lieu of VAT
For any product that is meant for retail sale, MRP is required to be declared at the point of import. Further, 4% Special CVD is not levied on products that carry MRP at the time of import. This causes peculiar complications for the industry. The industry has tens of thousands of SKUs that are imported. It is not possible to forecast accurately and get products manufactured that carry India specific labeling and within the required time and cost. As a result, products are bonded with customs; MRP labels are affixed and then released. This is a logistical nightmare and adds to the cost of import. It is requested that a provision to be made to exempt Medical Products falling carrying an MRP sticker at the time of import and permission be granted to importers to affix MRP stickers post importation at their own warehouses
Other Customs Exemptions
- All life saving medical devices, consumables used with devices in the specific life saving treatment procedure and their spare parts should be exempted from Customs Duty. It is recommended that the following be included in the list of Life Saving Products - Patient monitoring systems & image guidance systems, Pacemakers, Image Guided System, External Defibrillators, NT & ENT Surgery Products including electrical/pneumatic drills & the consumables, Deep Brain Stimulation Implanters, drug pumps, lead etc, Heart Lung Machine & Oxygenators- During cardiopulmonary, Heart valves, Annuloplasty Rings and various Cardiac catheters, Respirators and Masks (industrial & healthcare), Dialysis Machines equipments and Devices (Hemo and Peritoneal Dialysis) and Peripheral Vascular stents.
- The Sterilizers of Heading 8419 20 90 which are presently levied to import duty at 25.85% may be fully exempted from the levy of customs duties. Plasma sterilizer allows sterilization of all type of surgical instruments and devices.
- Topical Skin Adhesive of Heading 3006 10 10 which is presently levied to import duty at 19.567% may be fully exempted. These are used for wound closure, instead of conventional sutures.
- Custom Duty waiver for essentially required radiopharmaceuticals used in Diagnostics like Imaging and Scanning (PET-& SPECT) & Therapy some of which are not manufactured in India like Iodine 131, MIBG 131, Lutetium 177, Yttrium 90, Ge-68-Ga 68 generator, Cold Kits for Tc 99m, Rubidium 82.
- Polyurethane film (Heading 3926) used for the manufacture of adhesive coated PU film, Medical grade PVC (Heading 3921 90 99) required for the manufacture of dialysis products, Dextrose Anhydrous USP, for use in manufacture of Intravenous fluids be exempted from the levy of customs duties.
- Medical Stretcher / Wheel Chairs / Medical Beds should be levied to concessional rate of basic customs duty of 5%.
- Integrated Operation Theatre (Consisting of Routers, Booms, Pendants, Lights, Monitors, Camera, and Connectors etc) should be charged to a reduced duty of 5% basic and Nil CVD.
Excise Duty Recommendations
- It is recommended that the excise duty on medical equipments be reduced significantly and may be prescribed at the lowest slab to enable the domestic industry to find a foothold.
Service Tax Recommendations
- It is requested that the service tax on Service and Maintenance Contracts for medical equipments be either exempted fully or a minimal rate of tax prescribed for this sector
Scrip’s to Watch:
Optocircuits
Analyst Expectations/Outlook:
We expect exemption of custom duty on few life saving medical devices, consumables used with devices in the specific life saving treatment procedure and their spare parts. Also, Custom duty on import of finished goods and raw materials/components expected to be lowered. Some reduction in excise duty on medical equipments will benefit the industry.
