AiMeD seeks hike in custom duty on medical devices to a nominal 15% up from current 7.5% in Union Budget-24

 The Association of Indian Medical Device Industry (AiMeD) has submitted a Pre-Budget memorandum, urging Finance Minister Nirmala Sitharaman a strategic hike in customs duty on medical devices to a nominal 10-15 per cent.

“This will foster a more balanced trade environment, encouraging domestic manufacturing and reducing reliance on imports, which currently still constitutes a staggering 70 per cent of the sector,” said Rajiv Nath, Forum Coordinator, AiMeD.

“The imports of medical devices are consistently over Rs 61,000 crore for the last three years and regretfully this year have increased by 13 per cent to Rs 69,000 crore,” stated Nath in the Pre-Budget memorandum, also marked to Union Health and Family Welfare Minister JP Nadda, Secretary Apurva Chandra; and Arunish Chawla, Secretary, Department of Pharmacy.

A significant concern flagged by AiMeD in the memorandum is the prevailing inverted duty structure. To address this, AiMeD has proposed the implementation of a 5 per cent health cess on custom duty for the remaining medical devices as this was earlier applied to a limonite’s medical devices and this health cess was used to fund resources fir Ayushman Bharat.

“This correction is expected to harmonise the duty structure, making it more conducive for local manufacturers to thrive and be competitive globally and locally,” added Nath.

 Another pivotal aspect highlighted by AiMeD is the necessity for trade margin capping.

 “By monitoring the Maximum Retail Price (MRP) of imports, the Government will curb the excessive mark-ups often seen in the market. This measure will make medical devices more affordable and accessible to the Indian populace, ultimately benefiting public health as consumers are affected not by import duty protection as much as by artificially inflated MRP of medical devices,” he said.

 Referring to one of the core focusses of National Medical Devices Policy-2023 to reduce import dependence by 70 per cent and make India a global manufacturing hub of medical devices, Nath said that the Union Budget for FY 2024-25 must also announce income tax benefits specifically tailored for capital expenditure (CAPEX) and research and development (R&D) investments within the medical devices sector.

 “Such fiscal incentives are crucial for fostering innovation, enhancing production capabilities, and propelling India towards self-reliance in medical technology,” he said, adding that AiMeD suggestions are not just about immediate economic adjustments but are a strategic blueprint aimed at revitalising India’s medical device industry.

 Referring to a report (August 2023) of Global Trade Research Initiative (GTRI), Nath said the Indian medical devices industry can expand from $12 billion to $50 billion by 2030, reducing import reliance to 35 per cent and boosting exports to $18 billion. This shift could create 1.5 million jobs. The report says that the industry’s growth potential could surpass that of the smartphone sector due to India’s expanding health sector, projected to reach $600 billion by 2030.

 Concurring with six-action points for the government, as recommended by GTRI report, Nath said that the Government of India should raise basic customs duty from 0-7.5 per cent to 15-20 per cent for non-ITA1 devices, encouraging quality production and exports, and should remove Input Tax Credit for IGST on items with zero import duty to prevent unfair advantages over domestic producers.

 He said that the Centre must halt the import of used or old medical devices, ensuring safety, environmental protection, and domestic industry growth, and should introduce Performance Linked Incentive scheme to promote value-added production for high-import products.

 “The GTRI report rightly recommends to identify and counter foreign lobby influence on industry and research reports shaping policy; encourage local procurement, ensuring domestic manufacturers compete effectively during critical situations. The potential of the Indian medical device industry can be realised through these strategic actions, contributing to economic growth, self-sufficiency, and improved healthcare services,” concluded Nath.