As the proof of pudding is in the eating, the real impact of the new GST regime will be comprehended and appreciated only when it is able to create a beneficial impact on all stakeholders. And like any other sector, healthcare has multiple stakeholders - consumers or citizens being the most important. Why?

In a low- income country with a billion-plus population, healthcare after food security is the second most critical element of national well-being. Affordable healthcare assumes added significance when public healthcare outreach is limited both in terms of coverage and quality. If the healthcare cost goes up, national growth will slow down as a large portion of income which could be utilized for other capacity building or consumption will be diverted to simply keeping the population healthy.

Against this backdrop, the objectives of the new GST regime are laudable as it purports to increase tax compliance while eliminating multiplicity of taxation and simplifying tax administration. Whether it will also lower taxation burden on consumers leading to lower healthcare cost as well as on the industry is yet to be fully comprehended. Nonetheless, we can certainly indulge in some informed crystal gazing. But before that, the GST Council headed by Union Finance Minister Shri Arun Jaitley needs to be congratulated for doing speedy work on fixing the rate slabs of various goods and services for the new GST regime to be rolled out on the first day of July 2017.  The lead time will help get clarifications on grey areas and will also give time to the government to reconsider various tax slabs in the larger interest of economy and citizens.

Coming back to GST’s impact, since most of the medical devices have been put in the 12% slab, we at AiMED see little or no impact on the prices of devices. However, putting diagnostic reagents and equipment as well items such as operation tables, beds, operating chairs, dental chairs and non woven like drapes and masks, etc in 18% bracket and intraocular lens used for treating cataract up from zero % to 12% was least expected. This will increase the burden on consumers/patient steeply for these devices and it will raise the overall healthcare cost. This needs review.

One big grey area where the government needs to bring in clarity quickly is  how patients will be benefitted in the new scheme as is being expected unless MRP of consumables and implants comes down? Under the proposed scheme, price/cost benefits, if any, are only going to reach up to the retailers and hospitals but not up to the consumers. Unless, the MRP is brought down, anti inflationary benefits being expected from GST will not be passed on to consumers. The government needs to urgently bring clarity on this point.

Since imports will become cheaper in the new regime, we are also yet to comprehend as to how GST will boost ‘Make in India’ in medical device which is one of the flagship sector for catalyzing this visionary program. Cheaper imports will have direct adverse impact on domestic manufacturing and is likely to push our high import dependency further which today stands at 70% -- a concern that has been voiced by none other than Prime Minister Modi himself just the other day at a function to mark the 75 years of Tata Memorial Centre.

And one also needs to understand that cheaper imports do not automatically imply cheaper devices for consumers because MRP is kept deliberately high. So, pseudo manufacturers and importers import cheap but sell at a premium to consumers. Country looses in terms of revenue and consumers lose in terms of high prices. Only gainers are the middle men.

Thus, to address Prime Minister’s deeper concerns, the government would be well advised to act upon AiMeD’s various recommendations and the same could become the guideline for follow up actions by respective ministries and departments including the Finance Ministry e.g keeping basic import duty at minimal 10% up from 0-7.5 % currently. For telecom, mobile and electronics, the government has already stated its intention to boost domestic manufacturing through preferential taxation and subsidies.
 
We at AiMeD are also hoping that the new GST regime also devises and incorporates provisions which complement our larger national goal in medical device sector with a view to lower healthcare burden on citizens while boosting domestic manufacturing. I am positive this can be done easily and we will be waiting for the day to congratulate the government. We at AiMeD sincerely hope that the new GST regime creates a win- win situation for all stakeholders.
 

The writer is forum coordinator, Association of Indian Medical Device Industry and joint managing director, Hindustan Syringes & Medical Devices Ltd.