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:

    1. 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).

    2. 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. 

  • 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.

    1. BCD exemption on artificial kidney and parts for manufacture of artificial kidney to be withdrawn immediately.

    2. 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.

    3. 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.

  • 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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