Citizens' Issues
Maharashtra government rejects request to waive VAT on pacemaker, stents, AICDs

State turns down doctor’s petition to scrap 5% value-added tax on these life-saving items. Says these are used by the rich who can pay and cheaper versions are available for the poor

The Maharashtra government has rejected a request by a doctor to exempt life-saving equipment like pacemakers, automated implantable cardiac defibrillators (AICDs) and cardiac implants (stents) from value-added tax (VAT). It says that these products are used only by the rich who can afford to pay and therefore there is no need to interfere with taxes.

The government's response was on a petition by Dr Vijay Surase, consultant interventional cardiologist at Jupiter Hospital, who had written to the then state finance minister Sunil Tatkare, principal finance secretary Vidhyadhar Kanade, and the commissioner of sales tax on 1 October 2010, requesting the waiver of VAT on these life-saving items.

The government, in its reply on 18 January 2011, said "AICDs are used by rich people. The government levies 5% on pacemakers and coronary balloons. AICDs are not life-saving and not used by poor people. They are rich people's commodities and cheaper versions of this equipment, i.e. pacemakers, are available for poor people, and all on which govt levies 5% VAT. And this should not be waived off." A copy of the letter is available with Moneylife.

Dr Surase says, "Any implant which is imported is brought into use after lots of legal furnishings and compulsory processes. There is a compulsory 5% import duty on MRP paid. The dealers who are authorised to distribute the products to hospitals receive the goods after paying 2% central sales tax. Later they have to pay octroi which is charged on MRP."

Unfortunately, when transporting the product from one municipal corporation to another, dealers have to pay octroi again. Sometimes, they end up paying octroi twice-without getting a refund-if the product is returned by the hospital without using it. (None of the hospitals charge patients as per the MRP.)

Usually stents or implants are purchased in bulk by hospitals so they get a discount. "Somewhere they give one or two units free on purchase of ten, or likewise. Hospitals charge the patient some surcharge, which varies from 5% to 15% on the purchase price that is significantly lower than the MRP. Some charity organisations pass on benefits of the bulk purchase to the patient and can still afford to make some profit due to the volumes," Dr Surase explains.

He also says that the Cardiological Society of India's state representatives, interventional cardiologists, electrophysiologists, lack proper coordination and most of these bodies are defunct. "There is no spokesperson to represent this to the government. The government can only perceive losses for its treasury."

While Moneylife had previously reported that there are no fixed guidelines on the amount to be charged for stents, leading to discrepancies in costs billed by different hospitals, this rejection by the government comes as yet another blow to the public. Stents are life-saving items and the VAT charged adds a surcharge on the MRP.

The Food and Drugs Administration (FDA) has categorised cardiac stents and drug-illuting stents as drugs and pacemakers as non-drug implants. However, stents and pacemakers are life-saving implants. If they are brought under the life-saving implants category the government will have to exempt taxes on these items. Dilip Shrirao, joint commissioner drugs, FDA, says, "These are drugs and VAT, octroi, import taxes are imposed. But as they are sold at very high prices to consumers we are investigating the matter."

A stent dealer, who requested anonymity, said, "In India there is no transparency. It is very easy for the government to bring anything under price control once they have valid reasons for it. There are no clear-cut guidelines from the FDA or the government. The government charges 5% VAT, 5% import duty, 5.5% octroi and CST 2% on stents. And octroi is charged on the MRP and not on the price of the product. They are more concerned with the MRP."

The dealer also pointed out that while in the Customs book stents are categorised as life-saving implants, in the matter of octroi they are not. Cardiac stents and pacemakers are life-saving devices, but they are not classified by the government as such because it would have to reduce Customs duty, VAT and octroi on these items. Because of these taxes the cost of stents goes up. Without investing even a single paise, the government is collecting huge amounts through taxes and duties.

Dr Nilesh Baxi, an activist and senior physician says, "Dr Surase has sent his request on an individual basis and the government is not likely to respond favourably. The American Chamber of Commerce and the Federation of Indian Chambers of Commerce and Industry have approached the government with requests that these should be treated as life-saving devices and customs, octroi, VAT should be brought down. But even such powerful bodies couldn't impress the government; and every time they are being thrown back."

Doctors point out that heart ailments don't strike the rich alone. Heart diseases are one of the major reasons for death in India. With a large number of the population below the poverty line, the government's reply that such life-saving implants are required only by rich people is shocking. An illness doesn't strike a person depending on the economic background of an individual.

Their reason is that poor people don't suffer heart disease, but it is a known fact that in government hospitals itself there are a huge number of poor patients being treated for heart ailments and it is the government that pays taxes on their stents.

It is understandable that if the government provides tax relief on these items it would lead to a loss for the state exchequer, but compromising on human life is not an option. Dr Surase suggests: "The government can collect extra tax on entertainment, recreation and comfort. They can charge extra on these and make up for the losses. Life-saving implants should be subsidised for all."

He argues that taxing a rich person is like taking a glass of water from the sea.  People sell their apartments, ornaments and take loans to get medical treatment. By putting a tax on these implants they are forced to compromise on the quality of the stent.

Article 25 of the United Nations Charter of Human Rights states: "Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, and housing and medical care and necessary social services." But the government is depriving the poor of immediate healthcare required for their survival, by increasing their burden through such taxes.



Hasit Hemani

5 years ago

It was a well written and well investigated article. Hats off to Moneylife team. Salman Khan got his film tax free because he has right connections. Ambika Soni and his party fell head over hill to do it in a jiffy. ICC got tax exemption because Sharad Pawar tapped the right persons. Both cost the national exchequer crores of rupees. But poor Indian people have no mentor who will plead their case. Carry on Moneylife the cause of public concern.

Upmove in share prices stalled: Tuesday Closing Report

The first support for the Nifty is at 5,600, followed by 5,500

The market closed lower today in lacklustre trade. The consolidation in the Asian markets, after the recent rally, also weighed on investors.

As expected, the domestic market opened sideways after a flat finish on Monday, in the absence of cues from the United States, where markets were closed on Monday for the Independence Day holiday. Markets across Asia also consolidated their gains and were trading lower this morning. The Nifty opened nine points higher at 5,660 and the Sensex gained 23 points at 18,838. The opening numbers on the benchmarks were also their day's highs.

The market continued drifting southwards amid choppy trade and the lack of any major triggers. The indices touched the day's low in post-noon trade with the Nifty falling to 5,612 and the Sensex to 18,694. Buying in select sectors led the indices marginally higher, but profit booking kept a cap on the gains and the market closed in the negative today. The Nifty finished the session 18 points lower at 5,632 and the Sensex closed at 18,745, down by 70 points.

The Nifty moved in the range of 5,500 and 5,690 today, in line with our expectations, detailed in Monday's closing report. The upmove has been stalled. The first support for the Nifty is now at 5,600, followed by 5,480.

The advance-decline ratio on the National Stock Exchange (NSE) was balanced at 872:897.

Among the broader indices, the BSE Mid-cap index shed 0.09%, while the BSE Small-cap index rose 0.20%.

BSE Auto (up 0.88%), BSE IT (up 0.37%) and BSE Bankex (up 0.33%) were the noteworthy gainers in the sectoral space. On the other hand, BSE Oil & Gas (down 1.60%), BSE Fast Moving Consumer Goods and BSE Realty (down 1.29%) were the top losers.

The top Sensex gainers were Mahindra & Mahindra (up 2.24%), State Bank of India (up 1.57%), Wipro (up 1.06%), Maruti Suzuki (up 0.90%) and Sterlite Industries (up 0.76%). BHEL (down 4.49%), Reliance Industries (down 2.53%), Hindalco Industries (down 1.63%), ITC (down 1.58%) and DLF (down 1.20%) were at bottom of the index.

The major gainers on the Nifty were Ranbaxy (up 3.11%), Grasim (up 2.98%), M&M (up 2.62%), Reliance Capital (up 2.46%) and SAIL (up 2.34%). The main losers on the Nifty were BHEL (down 5.01%), Cairn India (down 3.38%), RIL (down 2.65%), Hindalco (down 1.97%) and ITC (down 1.53%).

Markets in Asia were mixed, as Chinese banks settled lower following comments from global ratings agency Moody's that bad assets would be a bigger burden for lenders than what was anticipated. On the other hand, a steady global economic recovery led Japanese and South Korean stocks higher.

The Hang Seng fell 0.10%, the Jakarta Composite declined 0.74%, the KLSE Composite shed 0.03% and the Straits Times fell by 0.75%. On the positive side, the Shanghai Composite rose 0.13%, the Nikkei 225 added 0.07%, the Seoul Composite gained 0.77% and the Taiwan Weighted closed 0.11% higher.

Back home, foreign institutional investors were net buyers of stocks worth Rs1,131.72 crore on Monday, whereas domestic institutional investors were net sellers of equities worth Rs369.32 crore.

Ashok Leyland, the flagship company of the Hinduja group, today reported a 4.63% decline in total commercial vehicle sales to 8,009 units in June 2011, compared to 8,398 units in the month a year ago.

Domestic sales stood at 6,824 units in June as against 7,497 units in the corresponding month last year, down 8.98%, while exports increased by 31.52% to 1,185 units last month from 901 units in the year-ago period. The stock gained 4.22% at Rs51.90 on the NSE today.

Paper manufacturer Rainbow Papers hopes to increase revenue to around Rs700 crore this fiscal, after the commissioning of the second phase of its Gujarat facility by September. The additional capacity build-up at the Gujarat plant envisaged capital expenditure of Rs327 crore. The expansion is expected to take the company's annual throughput to 3.05 lakh tonne from 1.83 lakh tonne. Rainbow Papers was down 0.25% to Rs60.80 on the NSE.

In a big setback to Aditya Birla group company Idea Cellular, the Delhi High Court on Monday said the six licences of Spice Communications, which it acquired in 2008, would not be transferred to the company as it had not complied with the licence and merger guidelines. The court also slapped a fine of Rs1 crore for not giving the correct information to the court.

The court further said that till Department of Telecommunications (DoT) allows Idea to use the licences of Spice Communication, the "overlapping licences of Spice shall forthwith stand transferred with DoT. The spectrum allocated for such overlapping licences shall also forthwith revert back to DoT." The Idea Cellular stock price declined 2.41% to Rs76.95 on the NSE today.

The telecom tribunal TDSAT on Monday allowed the plea of Tata Teleservices and directed DoT to immediately release the GSM spectrum for the Delhi circle on a priority basis.

The tribunal also slammed Idea Cellular and Unitech and said that they cannot claim parity with Tata Teleservices merely because they have submitted their licence fee earlier than the Tata group firm. Tata Teleservices (Maharashtra) fell 2.49% to Rs19.60 on the NSE.




5 years ago

mene abhi thodi der pehle sahara uttarakhand naws
chenal par dekha hai ki company band ho gayi hai kya ye sach hai ya jhoot please mujhe bataiye.dhanyavad.

RBI expresses concern over reliability of macroeconomic data

RBI governor Duvvuri Subbarao stated that the central bank is handicapped by the reliability of some of the basic data that we need to use in policy calculations. This has often resulted in policies turning out to be sub-optimal choices, he added

Mumbai: The Reserve Bank of India (RBI) today expressed concern over the sharply varying macroeconomic data, including those on growth and inflation, which it said on some instances led to off-the-mark estimates on the economy, reports PTI.

"In the Reserve Bank, we are handicapped by the reliability of some of the basic data that we need to use in policy calculations.

"In particular, the data we get on unemployment and wages do not inspire confidence as regards quality-making us second-guess how the provisional numbers may be revised upwards," governor Duvvuri Subbarao said today.

"Sharp volatility in the Index of Industrial Production (IIP) data is a problem. We need to understand what is leading to data volatility as it may lead to policy miscalculations," the governor told the 5th RBI Statistics Day celebrations at the RBI headquarters here.

"Each time when we have to make an assessment of inflation situation, we are left to double-guess how the provisional numbers may be revised upwards," he said.

"When we were making the policy, the IIP numbers available to us in February 2010 was 6.8%, whereas the economy was actually growing much faster. The provisional numbers, which are off the mark by significant margin, can mislead policy calculation," he warned.

The governor admitted that such revisions are also factors behind the RBI making inflation projections that proved to be below the actual number in the last fiscal year.

RBI had initially forecast an annual inflation at 5.5% by March 2011, but subsequently was forced to revise it upwards to a high 7% and then to 8%.

And finally when the year ended, it was at a much elevated level of 8.98%, which was ironically revised further upwards to 9.68% in June.

Similarly, the March IIP numbers were also revised upwards to 7.8% in June from the initial reading of 7.3% released in May, while a sharper revision was seen for the December IIP, which was upwardly revised to 2.5% from the provisional reading of a poor 1.6%.

"Erroneous signals from the then-available IIP data suggested moderation in growth and demand," as well as "the larger-than-usual upward revisions to the past inflation data, had the RBI's inflation projections remaining systematically below the actual outcome," Mr Subbarao admitted.

On the impact of the regular trend of sharp data revisions, the governor said, the RBI's policy formulation is also handicapped by frequent revisions to data.

"We make policies in real time and if the provisional data are inaccurate, the resultant policies can turn out to be sub-optimal choices," he said.

Citing the sharp changes in the gross domestic product (GDP) numbers, Mr Subbarao said, "For FY09-10, the advance estimate of GDP growth rate at market prices from the expenditure side that came out in February 2010 was 6.8%. That was changed to 7.7% in the revised estimate in May 2010 and further to 9.1% in the quick estimate in February 2011.

"Therefore, policy that per force had to use information on advance estimate was fraught with the risk of underestimating the growth momentum," the governor said.

Stating that the recently released employment data throw up a paradox, he said they simultaneously indicate fewer jobs created in the five years to 2010 along with a decline in the long-term unemployment rate.

On the issue of wage statistics, he said, the upward pressure on wages in the unorganised sector is inconsistent with what are believed to be high rates of unemployment and underemployment in the informal economy.


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