Medical device makers say GST rates key to domestic manufacturing competitiveness

Even as the Goods and Services Tax (GST) Council is meeting this week to discuss rationalisation of GST rates, Indian medical device makers have said that unless carefully done, tweaks in the GST rates for medical devices could impact domestic competitiveness.

Most medical devices now have a 12% GST, while inputs are taxed at 18%, causing an inverted duty structure and margin pressures. Hence, the proposed GST changes—to either 5% or 18%—both present significant risks requiring careful consideration, the Association of Indian Medical Device Industry (AiMeD) has said.

“For equipment, electronics, reagents, and implants, reducing GST to 5% would enhance affordability and market reach. However, applying a 5% rate to low-margin consumables like syringes, catheters and IV sets would worsen the inverted duty structure, increasing costs for Indian manufacturers and making imports cheaper,” said Rajiv Nath, Forum Coordinator, AiMeD. “Retaining 12% GST for most consumables while allowing 5% for high-value equipment is the most balanced approach”, he adds.

According to Nath, GST policy choices will directly impact patients and consumers as well as manufacturers. “Raising GST to 18% would increase medical device costs for hospitals and households, while a flat 5% GST without refund reforms may create supply risks by discouraging local production. A calibrated structure is therefore essential to ensure both affordability for consumers and sustainability for Indian manufacturers”, he points out.

Interestingly, representatives of Indian Rubber Gloves Manufacturers Association have sought 18% GST for nitrile gloves due to very high input credit accumulation and low value addition in a highly competitive price-sensitive import-dominated market.

AiMeD suggests streamlining GST refunds and allowing refunds on input services and capital goods to improve cash flow and competitiveness. “If the Government lowers GST from 12% to 5%, reduced manufacturer margins may force price hikes, hurting competitiveness against imports. Since GST aims to tax value addition without reducing competitiveness, AiMeD also proposes raising the Health Cess on imports from 5% to 10%, with proceeds funding Ayushman Bharat, to counteract cheaper imports”, the association says.

“With Indian manufacturers already facing ~15% cost disability against imports from China and ASEAN countries, GST policy must support Make in India, not disadvantage it,” Nath said.  “A calibrated GST structure can simultaneously promote affordability for patients, protect consumer interests, strengthen domestic manufacturing, and align with the government’s vision of Atmanirbhar Bharat.”