Imported drugs for rare diseases to be exempt from customs duty

Normally, medicines attract a basic customs duty of 10%, while some life-saving drugs or vaccines attract a concessional rate of 5%, or are completely exempt from duties

In a major move that would benefit several patients, the government announced a full exemption from basic customs duty on all imported drugs and ‘food for special medical purposes’ for personal use to treat all rare diseases listed under the National Policy for Rare Diseases 2021. Additionally, the government has also fully exempted Pembrolizumab (Keytruda), a Merck cancer drug, from basic customs duty.

Normally, medicines attract a basic customs duty of 10 per cent, while some life-saving drugs or vaccines attract a concessional rate of 5 per cent, or are completely exempt from duties.

In a notification that came into effect on March 30, the exemption has been granted by the Central Board of Indirect Taxes and Customs (CBIC) by substituting “Drugs, Medicines or Food for Special Medical Purposes (FSMP)” instead of “drugs or medicines”.

In order to qualify for the exemption, an individual importer must produce a certificate from the Central or State Director of Health Services, District Medical Officer or Civil Surgeon of the district, a Ministry of  Finance release said.

It added that while exemptions have already been provided to specified drugs for the treatment of spinal muscular atrophy or duchenne muscular dystrophy, the government has been receiving many representations seeking customs duty relief for drugs and medicines used in the treatment of other rare diseases.

“Drugs or special foods required for the treatment of these diseases are expensive and need to be imported. It is estimated that for a child weighing 10 kg, the annual cost of treatment for some rare diseases may vary from Rs 10 lakh to more than Rs 1 crore per year with treatment being lifelong and drug dose and cost, increasing with age and weight. This exemption will result in substantial cost savings and provide much needed relief to the patients,” it said.

In its meeting in September 2021, the GST Council had reduced tax rates for several life-saving drugs.

Life-saving drugs Zolgensma and Viltepso used in the treatment of spinal muscular atrophy were exempted from GST when imported for personal use. At that time, the GST rate for Keytruda was cut to 5 per cent from 12 per cent.

The story of a young couple who faced challenges to import a drug for their daughter

Congress MP from Thiruvananthapuram Shashi Tharoor had shared the story of a young couple who approached him for an exemption of duty for a drug on Twitter on March 28. The couple had imported a drug for their daughter who was suffering from cancer, and they were unable to pay a high duty for it.

 “They had scrounged and saved and borrowed and crowd-funded to raise the money required but when they imported the drug, they needed an additional Rs 7 lakhs for GST that they could not afford. When they approached me I wrote to Finance Minister Nirmala Sitharaman on March 15 asking her help to exempt them from the GST on humanitarian grounds. When there was no reply they approached me again on Sunday (March 26th); the injection was stuck at Mumbai airport but Customs would not release it without the GST payment. I called Mrs Sitharaman directly this time. I told her this baby depended on her exercising her authority immediately because the drug was perishable and would expire while in the custody of Customs. She was instantly sympathetic. She hadn’t seen my letter so I re-sent it. Within half an hour her PS, Sernya Bhutia, called to tell me she had spoken to the Chairman of the Board of Indirect Taxes and Customs. Within ten minutes Chairman Vivek Johri called me asking for more documentation. By 7 pm today the exemption was granted,” Tharoor had posted on Twitter on March 28.

With this exemption, several patients are expected to save spending on duty to import life-saving drugs.

GIVING A FILLIP

• Exemption has been granted by the CBIC by substituting ‘Drugs, Medicines or Food for Special Medical Purposes (FSMP)’ instead of ‘drugs or medicines’
• Individual importer must produce a certificate from the central or state director of health services, district medical officer or civil surgeon of the district
• Government has been receiving many representations seeking Customs duty relief for drugs and medicines used in treatment of other rare diseases
• In its meeting in September 2021, the GST Council had reduced tax rates for several life-saving drugs
• Government has also fully exempted Pembrolizumab (Keytruda), a Merck cancer drug, from basic Customs duty