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Domestic Medical Device Makers Raise Pitch For Duty Hikes On Imports

Domestic Medical Device Makers Raise Pitch For Duty Hikes On Imports


Mumbai, 16 July 2019:

 

Domestic medical device makers are calling for higher import duties, preferential market access and capping of trade margins to help local companies to take on foreign ones.

 

Association of Indian Medical Device Industry (AiMeD), the domestic industry lobby that claims to have around 300 members, has written to the government seeking 15 percent duty on imports of devices.

 

For products not made in India, AiMeD has called for 5 custom duty percent, and products that are made at low volumes at 10 percent.

 

At present, India imposes 0-7.5 percent import duty on medical devices. In addition to import duty, importers pay 12 percent GST, but they are eligible for input tax credit.

 

AiMeD says that post implementation of GST, importers are paying lower taxes than local companies.

 

"Before implementation of GST, imports of medical devices attracted 18.5 percent taxes including 7.5 percent customs duty, 6 percent countervailing duty (CVD) and 4 percent special additional duties (SAD). But for the CVD and SAD, importers never got any credit. So they got 10 percent saving on taxes, and haven’t passed them to the customers," Rajiv Nath, Forum Coordinator of AiMeD, told Moneycontrol.

 

Nath says Indian government should follow the example it set to curb imports of mobile phone handsets by extending it to medical devices.

 

India imposed 20 percent duty on imported mobile phone handsets to promote domestic production. The move helped mobile phone manufacturers to set up assembling units in India.

 

AiMed is also asking Indian government to give  preferential access to local manufacturers in public procurement.

 

The medical device industry in India is presently valued at $5.2 billion and is growing at 12-15 percent.

 

India imports about 80 percent of its medical devices. The domestic companies are largely involved in manufacturing low-end products for local consumption and exports.

 

Slowly some have started making devices of higher complexity such as stends, orthopedic and dental implants, and other medical equipment such as ultrasound machines, ventilators, among others.

 

"We don't have eco-system in place to indigenously make medical devices in India, we have to rely on imports for LCDs, moulding, semi-conductor chipsets, for everything that goes inside. The smart move is to attract global companies to assemble in India, to slowly build the ecosystem like what China did two decades ago," said Vinod Ramnani of Opto Circuits.

 

US is the largest exporter of medical devices to India, constituting one-fifth of the pie, followed by Germany, China, Singapore and Netherlands.

 

Government’s dilemma

 

Indian government while mentioning about the need to promote 'Make-in-India' for medical devices in the recent Budget , fell short of announcing any road map.

 

At a time when India and US are trying to resolve their ongoing trade disputes, raising import duties on medical devices may escalate into a tariff war, which India doesn’t want have at the moment. India’s capping of cardiac stents and knee implants had become sore point in India-US trade relations.

 

US government's tariff hike on Indian steel and withdrawal of duty free benefit for hundreds of Indian products in June and India’s retaliation by increasing tariff hike on 28 items, had already heated up things.

 

Meanwhile the import of medical devices have been surging ahead. The medical device imports have jumped 24 percent to Rs 38,837 crore in FY19, according to the latest export-import data.

 

But what is troubling is India imports even basic medical stuff like syringes, thermometers and weighing scales. For instance syringes imports are up 58 percent to Rs 424 crore. Indian companies have built significant capacities to produce syringes.

 

MNCs counter claims

 

On contrary multinational device makers who are major importers of medical devices say higher custom duties would prove counterproductive by impacting the cost of medical devices which will ultimately pass on to the patient.

 

They say that the custom duty regime on most of the medical devices in several neighboring countries are lower than in India, the difference in duties created could lead to the smuggling of the low-bulk-high-value devices.

 

"We must carefully note that China, even in segments like consumables where it has near self-sufficiency, has reduced their custom duties from 4 per cent to 3.3 per cent in 2017 for several products to avoid the problem of smuggling and to inject competition in the sector. Indian basic custom duty rate at 7.5% is clearly too high in the Asia-Pacific and should be revised downward," said Probir Das, Director, Medical Technology Association of India (MTaI) – the lobby group of MNC device makers.

 

“The government should actually look at reducing import duties on medical devices especially spare parts and implantable devices. This is more important now than ever before as the bottom lines of several companies importing medical devices have taken a hit of 14-19 percent because of multiple factors as rupee devaluation, restriction in raising prices (India allow 10 percent price increase per year), and inflation," said Badhri Iyengar, Director of MTaI and Managing Director of Smith & Nephew, India.

SOURCE : Moneycontrol