Government to Impose Health Cess on Import of Medical Devices

Shubham Chauhan

17 Feb, 2020

While presenting her second Union Budget Hon’ble Finance Minister Nirmala Sitharaman touched upon various sectors of the economy, including the vital Healthcare sector imposing 5% health cess on the import of medical equipment.

The key highlight of her budget speech over the healthcare sector was the imposition of 5 percent health cess on the import of medical equipment, over and above basic customs duty (BCD). With this imposition of 5% health cess, the government expects to boost the domestic medical devices sector and at the same time generate resources for health services. By adding 5% health cess, the revised customs duty becomes 12.5 percent. However, the government has exempted inputs and parts used in the manufacture of medical devices from the health cess.

The FM while presenting the budget said: “To give impetus to the domestic industry, and to generate resources for health services, it is proposed to impose a nominal of 5 percent on imports of specified medical equipment.” She further added that till a few years back, our country was dependent on imports for medical equipment. However now, India is not only manufacturing medical equipment but also exporting them in large quantities.

The question here arises whether this decision of imposing 5 percent will be able to generate the desired results or instead increase the end-cost on devices for patients? Well, we will have to wait and see how the healthcare industry gets impacted by this decision.

However, it is expected that the government will be able to gain about Rs 1,800-2,000 crore through the health cess.

Presently the medical device industry in India is valued at $5.2 billion and continues to grow at 12-15 percent. To support local manufacturers and create health infrastructure, the FM proposed to set up a Viability Gap funding window for setting up hospitals in Public-Private Partnership (PPP) model. The first phase shall cover those aspirational districts where at present there are no Ayushman-empanelled hospitals.

Industry Reaction on the Imposition of Health Cess

Although the purpose to impose a 5 percent health cess is to boost the growth of the domestic industry and create resources for health services. However, the representatives of the global research-based industry have expressed their disappointment over the decision. This imposition of 5 percent has increased the customs duty to 12.5%, which would eventually increase costs for the consumer-patients. India relies heavily on the import of medical equipment. The imposition of 5% will not only affect the import of advanced medical equipment. Moreover, the patients will have to pay more money to get their treatment done.

Take Away

The decision of the imposition of 5% health cess on import of medical equipment aims to boost the domestic manufacturing industry and at the same time generate resources for health services. This decision is good for the future outlook of India’s healthcare industry; however, as of now, patients will have to pay the brunt of this decision through increased medical bills.

Also, Read: Union Budget 2020-21: Key Highlights