GST’s implications on healthcare industry

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Post GST implementation, ETHealthworld talked with some of the healthcare industry leaders to find out its implications on different segments of the industry, from hospitals, diagnostics, pharmaceuticals to medical device

New Delhi: The healthcare industrywelcomed the implementation of GST (Goods and Services Tax) on July 1 and believed that the tax reform would have longer term benefits attached with it with no adverse effect in shorter period. “GST is going to unify the taxation system in India like never before. It is a huge development with great potential to benefit the GDP,” said Arindam Haldar, CEO, SRL Diagnostics.

No Reduction in Cost to Customers

Diagnostic services are exempted from any GST. However, the diagnostic companies do not see any reduction of the cost to customers; neither would the customers’ influx to diagnostic labs be affected. “We do not foresee any reduction in the cost to customers. There may be some reduction in GST as compared to VAT imposed earlier. However, to certain extent such benefits shall be off-set by increase in GST on services as compared to service tax. The rate of service tax used to be 15% till 30th June 2017 which has been replaced with GST @ 18%. There are a number of services under the scope of service tax, such as rent, logistic cost, professional fee, marketing agencies’ cost etc,” said Haldar.

Clinical Trials’ Cost May Increase

As of now, the rate of service tax on clinical trials is 15%. It has been replaced with GST @18%. Haldar said, “One downside of GST can be reflected in the increase in rates of conducting clinical trial researches in India. Naturally, the cost of carrying such studies would be going up and the government will have to figure out how to address this problem because with the attention being given to non-communicable diseases especially in the National Health policy, the need of the hour is to invest extensively in clinical researches and trials.”

Anticipated Surge in International Business

“The government’s decision to set aside 5% of the GDP for healthcare and taking necessary measures to attract more FDI into healthcare under the present budget is excellent. Under GST, there are already some proactive steps – cost of medical treatment is expected to come down, with lowering of prices on essential and life-saving drugs and reduction of custom duty on imported medical equipment. It is further anticipated that the cost of insurance and international travel will also reduce, which will lead to better prospects for medical tourism in the country,” said Bhavdeep Singh, CEO, Fortis Healthcare.

Impressions on Pharma Industry

“Pharmaceutical industry has seen a short term impact as stockists have partially withheld the purchases for the months of May and June, hence the sales in the first quarter of 2017-18 financial year have been impacted. The traders bought lower quantity of drugs than the usual to mitigate the impact of tax differential on inventory till 1st July. In the longer term, GST is going to be beneficial because it dissolves cascading effects of taxes and makes the tax process simpler,” said Kedar Upadhye, Global Chief Financial Officer, Cipla.

Medical Devices under Tax Burden

While there are no taxes on devices like hearing aids, 5% tax on nuclear grade chemicals, vaccines, diagnostic test kits, cardiac stents, artificial kidneys, dialyzers etc, 12% tax on X-ray tubes, radiotherapy machines, instruments, surgical electromedical apparatus etc; the high-end medical devices are going to face the burden of 18% taxes. “Nil GST will make Indian products non-competitive against imports. Higher GST will lead to higher competitiveness of Indian manufacturers against imports up to a certain point and beyond 18% GST will erode competitiveness and curb consumption. We recommend keeping all services in a nominal GST of 12% for general services and lower of 5% for healthcare services,” stated AIMED’s (Association for Indian Medical Device Industry) letter to Chief Economic Advisor, Ministry of Finance.

However, with a hope of GST being a game changer for India across all sectors, Bhavdeep Singh concluded, “This is one of the biggest tax reforms of our times. For the healthcare industry, we are pleased that hospitals and healthcare services have been exempted. With the recent announcements on generic medicines and pricing of medical devices, the government has displayed its seriousness to work towards making healthcare affordable to all. If we look at India’s healthcare infrastructure, there is currently a big divide between public and private healthcare, and there is a need to bridge this gap. Overall, we believe that GST is to help the industry in streamlining the tax structure, improving the operational mechanism and easing the way of doing business in India.”

Source:http://health.economictimes.indiatimes.com/news/industry/gsts-implications-on-healthcare-industry/59562840

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