MTaI urges the government not to levy TDS on free medical samples to doctors and clinicians

The new provisions will introduce unintended disruptions to the medtech industry and will also have ramifications throughout the entire healthcare industry

Medical Technology Association of India (MTaI) has urged the government to reconsider its recently introduced Tax Deducted at Source (TDS) provision on free medical samples provided to doctors. Taxation on these samples will adversely affect hands-on training for doctors and clinicians and therefore impact patients’ access to life-saving and life-enhancing technologies.

MTaI has also urged the government not to consider the expenses incurred on doctors’ (trainees) travel and stay for product training and application usage as Doctors’ income because they (doctors)are often required to travel mainly due to difficulties in mobilizing medical devices and equipment. Thus, TDS should not be levied on such expenses.

MTaI has already written to the concerned authorities highlighting the concerns of the industry.

Introduced in the Finance Act 2022, Section 194R of the Income Tax Act, 1961 regulates the taxability on benefits/perquisites arising to any resident from business or exercise of the profession to keep a check on tax revenue leakage. The Central Board of Direct Taxes (CBDT) recently on June 16th, 2022, published guidelines to enable effective implementation of the provision from July 1st, 2022, which has created concerns in the industry.

As per the provisions, free medical samples provided to doctors, reimbursement of out-of-pocket expenses incurred by healthcare professionals and expenditure pertaining to dealer or customer business conference would be treated as a benefit and therefore be subject to TDS deduction.

Pavan Choudary, Chairman & Director General, Medical Technology Association of India (MTaI), said, “Medical device samples are central to providing hands-on training to doctors and clinicians – in vivo and in-vitro and sometimes to even demonstrate to patients on how the procedure will be carried through. Any taxation on samples will prohibit these activities and hinder the doctor’s ability to deliver an optimal patient outcome which will impact patient’s access to life-saving and life-enhancing technologies.”

“Samples provided to doctors and clinicians arealways marked to denote that the unit is meant for physicians only and not for sale as required by the Drugs & Cosmetics Act and Medical Devices Rules 2017”, reasoned Choudary.

Regarding TDS deduction on reimbursement of out-of-pocket expenses incurred by the service provider, Sanjay Bhutani, Director, MTaI, opined, “The importance of training initiatives from a product usage point of view is significant and plays a vital role in achieving desired patient outcomes. As most of the training on the latest medical technologies is not imparted in medical colleges in India, therefore, it is imperative for companies to conduct these hands-on training initiatives and provide clinical application support to doctors. Due to the complexities involved with mobilizing medical devices and equipment, the trainee is often required to travel to a dedicated training site and thus incurs out-of-pocket expenses on travel and lodging which are provided by the innovator/manufacturer. Therefore, the expenses incurred on travel and stay for product training and application usage should not be treated as a benefit to doctors (trainees).”

“Most contracts with service providers are not covered under the fixed consultancy fees and are charged by the service providers as per actuals – for example-travel cost, hotel accommodation, etc., for which GST is already paid. It is impractical to convert all these actual reimbursable expenses under a company. To deduct a TDS on these actual reimbursements will be a loss to the service provider”, adds Bhutani.

Bhutani concludes by saying that the provision of continuous upskilling and training for adaptability to the technology must also be added to the exemption criteria as otherwise, the medical fraternity may become devoid of the benefits of CMEs, especially for an intricate sector like medical technology.