The medical devices sector can expect a higher tax burden due to proposed GST rates

The assertion that medical devices including surgical instruments would have a lower tax burden with GST rate pegged at 12 per cent instead of 13 per cent is based on a simple addition of all taxes subsumed into GST

“The medical devices sector can expect a higher tax burden due to the proposed GST rates, subsequently resulting in a higher cost burden to the patients,” says Sanjay Bhutani, Board Member, Medical Technology Association of India (MTaI).

“Under the current regime, the medical devices category attracts central excise/ countervailing duty (CVD) rate of 0 – 12.5 per cent, and the value-added tax (VAT) rate for all devices is five per cent. Consider two scenarios where a medical device attracts a CVD rate of zero per cent and six per cent, the embedded tax rate approximately comes to 7.5 per cent and 10.7 per cent respectively after considering a central sales tax (CST) at two per cent, VAT at five per cent and Octroi, entry tax etc.

The assertion that medical devices including surgical instruments would have a lower tax burden with GST rate pegged at 12 per cent instead of 13 per cent (which includes six per cent CVD and five per cent VAT besides the CST, Octroi and entry tax, etc.) is based on a simple addition of all taxes subsumed into GST. This, however, is without considering the fact CVD is levied at the first point (i.e. at the import price), CST on the billing price from the company to the distributor, and the VAT is levied at the last point (i.e. at the value at which the goods are finally sold to customers).

The medical devices including surgical instruments, therefore, will roughly have an additional tax burden of 4.5 per cent to 1.3 per cent as per the above two examples.

– Sanjay Bhutani, Board Member, MTaI