Zero customs duty on medical device to kill Make in India program: GSK Velu

With a lot of investment in the healthcare sector, concurrent increase in the number of medical professionals, and an agenda to reach out to as many people as one can, the motivation to expand is etched on everyone's list. The aforementioned factors are also responsible for driving the need for well equipped medical devices to provide a well rounded healthcare.

Medical devices market

In January last year, the government announced the first fiscal policy to support the Indian manufacturing by withdrawing concessional duty for few devices and nearly 30 percent of the devices were relieved. Same kind of benefits should be given to IVD and Implantable medical devices. There is no logic to have zero percent customs duty on any medical device, equipment or consumables as this will kill Make in India initiative by both MNCs and domestic companies. 

In China, much higher reimbursement is allotted to locally produced medical devices and equipment whereas we have completely reverse situation in India. We should learn from China and Brazil, the two large medical devices markets in the world where they pushed local manufacturing initiatives over the past two decades to become import independent and export focused. 

While it is common to have multiple lobbying groups to push their own interests it is important for both the State and the Central Government authorities to understand ground level problems faced by domestic manufacturers and provide right policy frame work to motivate local manufacturing initiatives. Instead of motivating local manufacturers, the local producers are put through real hardships by customs and excise authorities due to inverse duty issues and Interpretation issues, thus shying away investments and growth in this area. Finished goods importers not only get away with zero customs duty but also use sale in the course of import route to avoid paying sales tax and VAT levies in the country. Hence, importing finished goods and selling is a lot more attractive business model even today in the medical devices segment.

The 'Make in India' movement serves as a catalyst along with the bio medical engineering talent to vastly improve the innovation space to stimulate and provide opportunities to the domestic manufacturers. The Indian based medical device manufacturing companies are also tying up with the overseas manufacturers to expand and involve in terms of technology and market. 

The growth of medical industry is directly proportional to the economic growth that leads to a quality healthcare, more investment in healthcare by the people, a hike in funding in the healthcare sector by the private bodies, large and evolved wavelength of the health insurance policies, discovery and emergence of new technology.  

Suggestions to the Finance Minister

A certified body is required to carry out quality checks, manufacturing qualities, scientific trials and  then validation of the devices. If the health insurances have good penetration, it will eventually lead to a demand of better healthcare amenities. The Indian medical device industry with an accelerated progress and space for innovation are vying to capture and make a stronger impact on the global market. 

The second draft of the medical devices regulations notified by the Union Health Ministry was a lethal blow to the domestic medical device industry as more emphasis was given to the pharmaceutical industry than the med tech industry. A separate regulations framework for the medical devices industry is the need of the hour, to sustain long-term innovation and investment in the sector.  

In terms of Goods and Services Tax which has been the major discussion over the last year, we could expect a ‘diluted’ bill in the 2017-18 budgets. However, with a strong implementation of the originally proposed bill, the healthcare industry could suffer from severe threats since this could result in increasing the taxes and subsequently eroding the profits. 

As a consequence of demonetization, the government has already announced support to promote cashless transactions. We can look forward for further endowments for the mobile wallets/ debit and credit card transactions. Promising initiatives like Make in India, Skill India and Start-up India could uphold investor sentiments further up and help startups in earning seed capital. 

Dr GSK Velu is the CMD of Trivitron Healthcare Group of Companies