While the uniform rate has been positioned as a reform to simplify taxation, domestic manufacturers highlight that inputs for device manufacturing are taxed at 18 per cent
The GST Council’s decision to bring all medical devices under a uniform 5 per cent slab has been welcomed by industry stakeholders, though manufacturers continue to raise concerns over refund delays and competitiveness under the inverted duty structure.
According to The Economic Times, the announcement was made by Finance Minister Nirmala Sitharaman as part of the Council’s latest rate rationalisation exercise. Devices and consumables used for medical, surgical, dental, and veterinary purposes—earlier taxed at rates of 12 to 18 per cent—will now attract 5 per cent GST. The move also covers diagnostic kits, reagents, bandages, wadding gauze, and glucometers, reducing the effective tax burden on essential healthcare products.
While the uniform rate has been positioned as a reform to simplify taxation, domestic manufacturers highlight that inputs for device manufacturing are taxed at 18 per cent. This results in an inverted duty structure, where taxes on inputs exceed the final GST levied on finished goods. The gap has long led to capital lock-in, as refunds for accumulated input tax credits are delayed. Industry representatives have therefore urged the government to institute a faster refund mechanism to ensure liquidity.
Rajiv Nath, Forum Coordinator at the Association of Indian Medical Device Industry (AiMeD), noted that the reduction is a positive step, provided refund timelines are shortened. “We welcome the decision to reduce GST from 12 per cent to 5 per cent if refund on accumulated GST due to the inverted structure will be made within 7 days as being informed,” he said. He further pointed out that extending refunds to taxes paid on services and capital goods—similar to systems in Australia, Singapore, and Canada—would enable Indian manufacturers to remain globally competitive.
Earlier industry submissions had recommended a 12 per cent GST slab for the sector, arguing that it would reduce the extent of inversion and help Indian firms compete with imports that often benefit from lower tax incidence. Without structural correction, companies warn that the intended benefit of rate cuts may not translate into stronger domestic manufacturing.
Industry associations, however, also recognise the affordability gains for patients and diagnostic service providers. Ameera Shah, President of NATHEALTH, said the government’s move to bring down rates on diagnostic kits, reagents, and a broad range of MedTech products is aligned with the sector’s calls for a more enabling indirect tax framework. She added that reductions in GST on products such as health insurance, glucometers, and corrective spectacles will improve access and affordability of essential health services.
Manufacturers also flagged operational challenges linked to the transition, particularly updating packaging materials to reflect revised maximum retail prices. According to AiMeD, a short transition period will be required to ensure that the tax benefits flow to consumers without disrupting supply chains.
The rate cut signals a policy intent to simplify India’s indirect tax regime while reducing healthcare costs. For industry stakeholders, however, its success will depend on how quickly refund bottlenecks are addressed and whether complementary reforms create a level playing field for domestic producers in a highly import-dependent sector.
