The Union Budget, 2022-23 was presented by the finance minister, Ms. Nirmala Sitharaman before the Parliament on February 01, 2022.
The budget did not include much expected propositions of pharmaceutical and medical device industry, such as extensive budget allocations and subsidies/incentives for R & D. However, the overall big plans such as to extend relaxations to start ups, proposal of national digitization of health records/system, announcement of national tele mental health campaign and support to newer businesses through proposed blended finance route is expected to bring about positive impact and activities in the industry.
The key highlights relevant to the healthcare and pharmaceutical industry are briefly set out below.
- Budget Allocation
INR 86,200 crores has been allocated as a budget for the pharmaceutical and healthcare sector. The allocation has been hiked by a negligible increase of 0.2% as compared to the budget allocation of 2021-22.
- Rationalization and Reduction of custom duty on
chemicals/inputs impacting Pharmaceutical and Healthcare
industry
- The budget proposes following changes in custom duty rates
concerning pharmaceutical and healthcare industry:
- Reduction of custom duties on some of chemicals and raw
materials used for producing drugs.
For example, acetic acid which is used in manufacturing vitamins, antibiotics, etc.
- With effect from May 01, 2022, the custom tariff for the
following will be incorporated in the Customs Tariff Schedule
itself instead of prescribing them through various
exemption/concessional notifications:
- Lactose/ lactose syrup (used as a filler or binder while
manufacturing medicines), ethyl alcohol (used as a disinfectant/
antiseptic) and sulphur (used for curing skin disorders).
- Specific instruments and appliances like tonometer, tubular
needles etc. (used in medical, surgical, dental or veterinary
sciences), other medical equipment and medical related goods like
defibrillator etc. (used in medical, surgical, dental or veterinary
sciences), mechano-therapy appliances, orthopedic appliances
and breathing appliances other than protective masks not
having replaceable filters or mechanical parts.
- Lactose/ lactose syrup (used as a filler or binder while
manufacturing medicines), ethyl alcohol (used as a disinfectant/
antiseptic) and sulphur (used for curing skin disorders).
- In line with ‘Make in India' objective, some
important changes in the basic custom duty (BCD) with respect to
medical devices and drugs were announced by way of omission and
rationalization of entries as set out below.
- BCD exemption on artificial kidney and parts for manufacture of
artificial kidney to be withdrawn immediately.
- The prescribed end date for withdrawal of BCD exemption on
goods used for research and development purpose in pharmaceutical
and bio- technology sector to be March 31, 2023.
- BCD exemption on lifesaving drugs/medicines including their
salt, diagnostic kits to be rationalized and accordingly 35 items
will be removed from List III of Entry 166 and 36 items to be
removed from List IV of Entry 158. Certain items from Chapter 38 to
be shifted from List IV to List III.
- BCD exemption on artificial kidney and parts for manufacture of
artificial kidney to be withdrawn immediately.
- Increase the custom duty on sodium cyanide, X Ray Machines and
parts used in manufacture of X Ray Machines to be effective from
February 02,2022.
- Withdrawal of Health Cess on surgical needles imported for
manufacture of surgical sutures made effective from February
02,2022.
- Income Tax
- No Business deduction from April 1, 2022 on freebies and
largesse offered to doctors by pharmaceutical
companies.
- Health and Education Cess is imposed as an additional surcharge
on the taxpayer for funding specific government welfare programs.
It was clarified that any surcharge or cess on income and profits
is not allowed to be claimed as deduction in the form of business
expenditure. This clarification has been made applicable
retrospectively from the assessment year 2005-06.
- Blended Finance
The Government will promote a blended finance mechanism wherein the government's share will only be 20% and the funds shall be managed by private fund managers. This is likely to broaden the scope for manufacturing, research, development and innovation in the pharmaceutical sector paving way for start-ups and employment opportunities.
- National Digital Health Ecosystem
- The Ayushman Bharat Digital Mission (ABDM) introduced by PM
Narendra Modi in September 2021, aimed at creating a seamless
online platform that would enable interoperability within the
digital health ecosystem. ABDM now connects the digital health
solutions of hospitals across the country with each other. Every
citizen of India is now required to get a digital health ID and
their health record shall be digitally protected.
- Accordingly, Ms. Nirmala Sitharaman officially launched an open
platform for National Digital Health Ecosystem under ABDM,
comprising of an exhaustive list of digital registries of health
providers and health facilities, unique health identity, consent
framework, and universal access to health facilities. An amount of
INR 200 crore has been allocated for this purpose.
- The Government has also introduced a National Tele Mental
Health Programme for addressing mental health issues of its
citizens.
- Healthcare Missions and Central Sector
Schemes
There has been an increase of almost 7% in the allocation of annual budget towards the National Health Mission compared to the last budget. Although no specific allocation of budget has been announced for production of Covid-19 vaccinations for health care and front line workers under this mission, there are some positive announcements on the overall health care scheme. These specifically are:
- The Pardhan Mantri Swasthya Suraksha Yojana has been allocated
INR 10,000 crores and the budget allocation for the health
infrastructure was increased to INR 978 crore.
- The Pradhan Mantri Ayushman Bharat Health Infrastructure
Mission has received a significant increase in budget allocation
this year. INR 4176 crores of the allocated budget is proposed to
be transferred to the states for supporting wellness centres,
setting up of integrated public health labs and critical care
hospital blocks in districts with a population of more than 5
lakh.
- Mission Shakti, Mission Vatsalya, Sakasham Anganwadi and Poshan Maah 2.0 are three schemes which were launched to provide integrated benefits to women and children. Among these, Saksham Anganwadis are new generation anganwadis that have better infrastructure, audio-visual aid powered by clean energy and provide improved environment for early childhood development. This year the budget proposes to upgrade two lakh anganwadis.
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