Budget FY24: AiMeD recommends increasing custom duty on import of Chinese medical devices

Imports from the US also increased steeply by 48 percent to Rs 10,245 crore in 2021-22 (FY22) from Rs 6,919 crore in 2020-21, the statement from AiMed said. The value of medical devices from China was nearly the same as the combined value of imports from Germany, Singapore and the Netherlands in 2021-22 (FY22).

The medical devices imports continued to grow at an “alarming” level by 41 percent in FY22. India imported medical devices worth Rs 63,200 crore in 2021-22, up 41 percent from Rs 44,708 crore in 2020-21, according to data from the Union ministry of commerce and industry.

AiMeD has recommended some measures for the Union Budget FY24 to end the 80-85 percent import dependence forced upon India, with an ever-increasing import bill of over Rs 63,200 crore.

The industry body said it was more than hopeful and positive that the governments would act upon the request of the Indian medical device industry for a separate department of medical devices. This key strategic need has also been recommended by the Parliamentary Committee on Health, it said.

Read also: Industry body writes to PM, demands separate Department for Medical Devices

AiMeD has also urged the government to consider shifting from an 8-digit HS code to a 10-digit HS code as done by the US and Europe to give more granular data for enabling better analysis and policy-making. Among industry classification systems, harmonized system (HS) codes are commonly used throughout the export process for goods. The harmonized system is a standardised numerical method of classifying traded products.

As done for mobile phones, AiMeD said the government should protect the manufacturing base in India by increasing basic Custom duty on import of medical devices to at least 10 to 15 percent from current 0-7.5 percent duty though WTO (World Trade Organization)-bound rate is mostly 40 percent.

Due to such low custom duty, India is importing Rs 63,200 crore of medical devices and is over 80 percent import-dependent, the body said. This 80 percent can be reduced to below 30 percent with correct policies as done for mobile phones and consumer electronics.

Instead of 18 percent GST applicable on some medical Devices that are not luxury goods, the industry body recommended that the GST needs to be a flat 12 percent on all medical devices.

On the lines of trade margin monitoring or rationalisation, AiMeD said the purpose of low duty was to help consumers get affordable access to devices. This objective is not realised if consumers will be charged a high maximum retail price (MRP) of 10 to 20 times the import landed price, it added.

Customs recording of MRP on bill of entry will assist to bring in data generation for policy-making by evidence of a trade margin rationalisation policy for the manufacturer or importer.

With this process, the industry body said there could be a capping of maximum four times on the ex-factory price and on the import landed price of Indian distributor at the first point of sale, namely when GST or import duty is first levied on entering into the market.

Trade margin rationalisation is a mode of price regulation by way of capping trade margins in the supply chain. This is the difference between the price-to-trade margins by manufacturers and price to patients which means maximum retail price.

The statement from AiMeD also said reducing GST to 5 percent is also making Indian products non-competitive to imports as then manufacturers are unable to keep reduced ex-factory prices based on lower input costs net of GST.