Cess on medical device imports may cast a shadow on US deal

New Delhi: The proposal to impose a nominal cess on imported medical equipment may cast a shadow on a trade deal that is likely to be signed when US president Donald Trump visits India in the last week of this month. Finance minister Nirmala Sitharaman cited India’s turnaround from a country dependent on imports for medical equipment few years back to exporting them in large quantities while proposing the cess in her budget speech.

The sector deserved a fillip and there was also the need to provide health services to all through Ayushman Bharat, she said. “To achieve the twin objectives of giving impetus to the domestic industry and also to generate resource for health services, I propose to impose a nominal health cess, by way of a duty of customs, on the imports of medical equipment keeping in view that these goods are now made significantly in India,” Sitharaman said. The cess would be used for creating infrastructure in health services in aspirational districts, she said.

A trade deal pegged above $10 billion (more than Rs 70,000 cr) has been slated to be finalised when US Trade Representative Robert Lighthizer visits Delhi. Sources had earlier said that India’s price control regime on medical devices was a key obstacle in trade talks but it was resolved. However, the budget announcement about cess could create a fresh issue, though sources said that the matter is being addressed.The US government has been particularly interested in removing price controls on coronary stents and knee implants. Medical device imports went up 24% to Rs 38,837 crore in FY19, according to the latest export-import data.