New Delhi, September 16, 2025: The Association of Indian Medical Device Industry (AiMeD) has submitted recommendations to the Hon’ble Union Finance Minister and GST Council Chairperson, Smt. Nirmala Sitharaman, seeking balance GST reforms.

AiMeD said the proposed reforms will help reduce healthcare costs for consumers. They will also bring India’s tax system in line with global best practices. At the same time, these reforms are expected to make Indian manufacturers more globally competitive.

Welcoming the reduction of GST on medical devices to 5% and the decision to refund 90% of accumulated credit within 7 days, AiMeD expressed gratitude for the government’s responsiveness. However, it emphasised that additional reforms are critical to address persisting challenges such as working capital stress, inverted duty structures, and restricted refund eligibility.

Key reforms proposed by AiMeD include:

Simplification of GST Refund Mechanism – Extend refund eligibility to Input Tax Credit (ITC) on services and capital goods, which are currently excluded.

Uniform 5% GST rate on inputs – Align GST rates for all components and raw materials in medical device manufacturing to permanently eliminate inverted duty structure issues.

Amendment of Rule 89(5) – Include ITC on services, capital goods, and closing inventory in the refund formula.

Automated, time-bound refunds – Introduce provisional 90% refunds within strict timelines to ease liquidity for manufacturers.

“Global best practices in countries like Australia, New Zealand, Canada, and the EU allow full refund or carryforward of unused GST/VAT paid on inputs—including services—so that exporters and businesses with inverted duty structures do not suffer cash flow blockages or tax cascading. India must adopt similar reforms if we want to lower healthcare costs, strengthen Make in India, and improve global competitiveness,” said Mr. Rajiv Nath, Forum Coordinator, AiMeD.

Most countries provide GST/VAT refund on accumulated input tax credit from services because their systems are designed to ensure tax neutrality for businesses. In India, refunds are largely restricted to exports and inverted duty structures, leaving manufacturers with blocked capital. Allowing refunds on GST paid for services and capital goods would ease cash flows, reduce costs, and encourage investment in capacity-building.”

Experts note that India’s restrictive approach stems from policy concerns such as fear of revenue leakage, misuse of refund claims, administrative complexity, and the belief that accumulation may even out over time as credits get adjusted against future liabilities. Historically, India limited refunds to avoid large claims from high-service or goods-input sectors that are not export-focused, due to worries that broad refunds might encourage fraudulent claims or create undue pressure on tax revenues.

AiMeD has also urged the government to increase the Health Cess on imported medical devices from 5% to 10%, with proceeds ring-fenced to fund Ayushman Bharat and public healthcare programmes. This would partially offset the 15% cost disability faced by domestic manufacturers when competing against low-cost imports, while ensuring socially beneficial reinvestment.

Mr. Nath added, “GST should be a tax on value addition—not a tax that burdens businesses or consumers with blocked working capital. By enabling refunds on GST paid for services and capital investments, and by rationalising Health Cess, India can make its medical device industry truly globally competitive while ensuring lower cost gains for patients and hospitals.”

AiMeD has enclosed a detailed annexure with HS codes of finished products and inputs, outlining current and proposed GST rates and Health Cess rationalisation measures.