Key expectations of life science and healthcare {industry} from Budget 2022-23

Impact of Covid-19 pandemic on the LSHC {industry}
The Covid-19 pandemic has had a considerable affect on the complete Life Sciences and Health Care (LSHC) {industry}. From scarcity of masks, vaccines, APIs, medicines to shortage of oxygen concentrators, the sector has witnessed all ups and downs through the previous 20 months. Since the onset of the Covid-19 disaster within the nation, the Government of India has laid better emphasis on introducing insurance policies to strengthen the Indian healthcare {industry}. The Prime Minister’s Atmanirbhar Bharat Abhiyaan launched in May 2020 and November 2020 included a number of short-term and long-term measures for the LSHC {industry} together with Production-Linked Incentive (PLI) schemes for enhancing home manufacturing of prescribed drugs and medical gadgets.
The authorities’s interventions on offering tax incentives to the healthcare {industry} has opened up better avenues for {industry} individuals akin to hospitals, pharma corporations, medical gadgets and gear producers, medical health insurance corporations, telemedicine and so on. The authorities’s announcement of production-linked incentive scheme with a monetary outlay of Rs 6,940 crores on 21 July 2020 geared toward boosting India’s bulk drug facility was a welcome measure for Indian Active Pharmaceutical Ingredients / Key Starting Materials / Drug Intermediaries producers. Similarly, Phase II of the PLI scheme notified on 3 March 2021 was targeted on complicated generics, patented medication, in-vitro gadgets and so on., with a monetary outlay of Rs 15,000 crores. With these schemes, it’s anticipated that India’s home pharmaceutical market will develop 3x within the subsequent decade or so. Additional initiatives by the federal government to fight pandemic had been discount in primary Customs duties on Covid-related medication akin to Remdesivir and its key uncooked supplies, oxygen cylinders, diagnostic kits, exemption on Covid reduction materials donated from overseas, ease in Customs clearances for Covid associated imports and so on.
Key points confronted by the {industry}
Despite the federal government’s measures to spice up the LSHC {industry} to fight the Covid-19 disaster, there are nonetheless numerous tax points which want consideration akin to inverted responsibility constructions for medical gadgets, exemption for healthcare providers resulting in blockage of enter tax credit, disputes on classification and GST charges for hand sanitizers, classification of equipment/elements of medical gadgets and so on.
The Covid-19 pandemic has remained difficult for the Indian healthcare system. Lack of sufficient healthcare infrastructure, demand-supply mismatches and shortages of primary provides are some issues that got here to the fore through the pandemic. Therefore, the federal government must give attention to rising healthcare spending and introducing extra industry-friendly insurance policies within the LHSC sector. The introduction of rising know-how viz. Artificial Intelligence, Machine Learning, Internet of Medical Things (IoMT) and so on. within the healthcare {industry} particularly within the telemedicine start-ups, wants bigger monetary help from the federal government. Further introduction of R&D tax credit within the healthcare {industry} is crucial to revolutionise the healthcare amenities within the nation. While all these points can’t be mounted in a single go, some key areas that the federal government ought to think about from a GST standpoint are as follows:
Key asks of the LSHC {industry} from Union Budget 2022-23
Zero-rating of healthcare providers: Due to the GST exemption on healthcare providers, GST paid on inputs and enter providers used on this {industry} turns into a value within the system leading to elevated costs. Zero-rating of healthcare providers will allow the {industry} to say refund of the GST paid on inputs and/ or enter providers used for the availability of healthcare providers, thereby decreasing the general price for the buyer.
 
Reduction of GST price on medical gear and gadgets: The present GST price on numerous medical gear,  gadgets and devices is 12 per cent. It is advisable that medical gear, gadgets and devices and their elements be introduced at par with different preferential merchandise and taxed at a preferential GST price of 5 per cent to scale back the price of healthcare providers.
 
GST classification of Hand Sanitizers: Ever because the issuance of press launch dated 15 July 2020 clarifying that alcohol-based hand sanitizers appeal to a GST price of 18 per cent, the classification of hand sanitizers has change into an enormous situation throughout the {industry} gamers in addition to the federal government. It has unsettled the pre-GST place ensuing into numerous enquiries and investigations for taxpayers. Appropriate readability backed up with authorized rules ought to be offered by the federal government to deal with this burning situation.
 
GST credit score of expired items: The expiry of the medicines ranges from 2-3 years from the date of manufacture. Accordingly, the return of such expired medicines to producers/distributors and subsequent disposal by the producers/distributors requires reversal of enter tax credit. Considering the truth that this can be a necessary enterprise want, such credit score reversal shouldn’t be warranted.
The sector has performed a pivotal position within the unprecedented Covid-19 pandemic disaster and over the last 20 months, we’ve additionally realised the dire must additional strengthen this sector. While the federal government has taken a number of steps to make the sector really Atmanirbhar, addressing the above points would even be one other step in the suitable path.
Gulzar Didwania is a Partner and Anubhav Jain is a Manager with Deloitte Haskins and Sells LLP. Views expressed are that of the authors.