Budget 2023: Industry leaders from diagnostics sector demand GST exemptions, standarised tests | The Financial Express

Budget 2023: Industry leaders from diagnostics sector demand GST exemptions, standarised tests

Union Budget 2023: The government should also incentivise manufacturers of medical devices and equipment with exports linked incentives, experts told Financial Express.com.

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Labs with a higher workload would have much lower cost per test and can be much more competitive in their pricing. (File)

Union Budget 2023: Finance Minister Nirmala Sitharaman will announce the Union Budget 2023-24 on 1 February 2023.

Ahead of the budget, key industry leaders from the healthcare sector have demanded that the upcoming budget should focus on increasing government health expenditure on health as a percentage of GDP.

According to the latest National Health Accounts Report, it has been stagnant at around 1.2-1.3 percent. In the diagnostics segment, industry experts told Financial Express.com that the coronavirus pandemic brought the significance of diagnostics and timely screening to the forefront.

‘Screening programmes under Ayushman Bharat scheme’

Narendra Varde, MD, Roche Diagnostics India and Neighbouring Markets, told Financial Express.com that In India, diagnostics accounts only for 2 per cent of healthcare spending while diagnostics influence over 66 percent of clinical decision-making.

“India critically needs to introduce screening programmes under the Ayushman Bharat scheme for infections such as HIV, hepatitis and HPV leading to cervical cancer in women. Moreover, introducing population screening for infectious disease will facilitate future-proofing of the health system. More emphasis is required on quality standards and better patient outcomes. Public-private partnerships (PPP) must have a commitment towards end-to-end project support and the primary importance should be an accessible and uninterrupted supply of critical medical solutions,” Varde told Financial Express.com.

Varde also emphasised that the pandemic also underlined several vulnerabilities within India’s healthcare system. In the Economic Survey of 2022, India’s public expenditure on healthcare stood at 2.1% of GDP in 2021-22 against 1.8% in 2020-21 and 1.3% in 2019-20

“While the government has taken several measures to improve healthcare infrastructure across India, incremental progress won’t suffice. India needs to ensure equitable access to healthcare by building a more reliable and responsive infrastructure keeping in mind the over 1.400 billion population of the nation which has surpassed China. China spent around  6.7 percent of the GDP on healthcare in 2021, the disparity in health spend is huge between the two nations,” he added.  

GST exemptions for diagnostics equipments and consumables

According to Hasmukh Rawal, MD & Co-founder, Mylab Discovery Solutions, diagnostics equipment, consumables, kits and reagents are primary inputs to the service delivery establishments like laboratories and hospitals.

“All of these items attract GST whereas healthcare services including diagnostics services are exempt from GST. This creates an issue for healthcare services establishments as they are then compelled to inflate the cost of the service and transfer it to the consumer. Government should remove GST from diagnostics equipment and consumables, at least from made-in-India products,” Rawal told Financial Express.com.

He also urged that the government should also incentivise manufacturers of medical devices and equipment with exports linked incentives.

“Together with GST waiver and Exports linked incentives, Indian medical and diagnostics equipment makers would get a level playing field, and at the same time, it will attract good investments in the form of long-term patient-capital, which is much-needed for the technological advancements in this sector,” he added.  

According to Deepak Sahni, Founder and CEO, Healthians, the government should push for enhancement of health insurance premium exemption, and an increase in tax exemption on preventive health check-ups.

“At the same time, while healthcare services are exempt from GST, the high GST rates on diagnostic equipment, re-agents, lab supplies and devices, ultimately is a hindrance in bringing down the cost to the consumer. I look forward to some relief from this burden on the consumer by a reduction in the GST rates,” he told Financial Express.com.

Ved P Goel, Group CFO, Dr Lal PathLabs Ltd. told Financial Express.com that the government to consider 0% GST on diagnostic services and exempt diagnostic industry from reverse charge mechanism provided under GST.

‘Standarised Lab Tests Across India’

Anand. K, CEO, SRL Diagnostics told Financial Express.com that it is time the government looks at minimum quality standards for the industry and also appoint a nodal agency to standardize lab tests across the country.

“Standardising test codes by adopting LOINC Codes and homogenizing lab report formats can help patients as well as clinicians. Taking a cue from the CLIA standards in the US for lab developed tests, our regulatory bodies like CDSCO can open up the regulatory framework that will help laboratories build indigenous test customised to the Indian population, encourage more research and foster innovation. This will reduce our dependence on imported kits for laboratory tests,” Anand K told Financial Express.com.

India could become self-reliant in test kits in a few years with the right kind of support from the policymakers and the government, he claimed.

“Reducing the high custom duty on the import of diagnostic equipment and kits can help large laboratories like SRL to improve efficiencies and increase investments in R&D. Easing the cost burden by giving input tax credit for GST will aid the entire healthcare industry to reduce input costs,” he added.

Increased Budget Allotment to Public-Private Partnerships

According to Anand, the government could look at increasing the allotment of budget to public-private partnerships and move from a provider role to an enabler role.

“This is the fastest and most efficient route to deliver quality healthcare to the masses. Policymakers can customize health delivery to districts, cities and towns by harnessing the big data generated by laboratories. PPPs for such collaborations could be useful as labs can provide actionable health insights that can improve the health indicators of a particular state. We also hope that the government will look at instituting an official council that can help establish credibility and credentials of medical laboratory professionals and allied health professionals,” Anand told Financial Express.com.

In absence of any regulatory legal mechanism to oversee the educational and professional standards, educational institutions have been mushrooming unabatedly across the country, he added.

“As seen in the pandemic, along with doctors, medical lab and allied health professionals are the backbone of the industry and it is important to provide avenues for up-skilling and reskilling by way of continuous technical education,” he said.

‘Raising income tax allowance with respect to payments’

A Ganesan, Group Vice-Chairman, Neuberg Diagnostics, told Financial Express.com that medical establishments such as hospitals and diagnostic centres often face delays in receiving payment from government departments like CGHS, NHS, and ESI Hospitals.

“I believe one of the major problems at the moment is that medical establishments such as hospitals and diagnostic centers often face delays in receiving payment from government departments like CGHS, NHS, and ESI Hospitals, which can cause working capital difficulties for MSMEs. I believe that the Hon’ble Finance Minister should consider raising the income tax allowance in respect of payments made under the Annual Health Check under Section 80D,” Ganesan told Financial Express.com.

According to Goel, to spur investment in creation of diagnostic infrastructure in the country the government may consider tax holiday period of 15 years for new investments in creation of diagnostic infrastructure such as labs, patient service centers in the country.

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First published on: 23-01-2023 at 15:18 IST