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Expectations Of The Fintech Sector
The sector should be accorded priority sector status to enable better funding access with setting up specialised funds for infrastructure development for hospitals in Tier-II, Tier-III cities and rural areas.
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Budget 2021 has a task ahead to revive the economy from the impact of Covid-19 pandemic and the focus of the government should be to generate local demand and provide a much needed stimulus package. In India’s fight against this unprecedented health crisis, immense contributions have been made by the healthcare sector, despite facing challenges like allocating CapEx, research and development (R&D) and manufacturing for Covid-related drugs, and managing raw material supply chain, particularly the imports.
The pandemic has re-emphasised the need for collaboration of the private sector players withacademia, scientific experts and governments to undertake drug discovery, and thus, R&D growth in India would be very crucial in the times to come. Equally important is to provide affordable healthcare facilities, which warrants an immediate focus on the development of healthcare infrastructure and measures to cut the cost of providing healthcare services. Considering this, the government should meet both transitional and strategic needs of the healthcare sector in the upcoming budget.
In order to achieve the objective of providing affordable healthcare services to every corner of the country, the government should focus on infrastructure creation in healthcare by providing subsidised loans and land for setting up healthcare facilities and hospitals especially in rural areas. The sector should be accorded priority sector status to enable better funding access with setting up specialised funds for infrastructure development for hospitals in Tier-II, Tier-III cities and rural areas.
It is recommended that special tax holidays and incentives should also be provided to healthcare facilities, which could aid more infrastructure creation by lowering their operational cost. For instance, section 35AD of the Income-tax Act 1961 (ITA) currently provides an option to claim 100 per cent deduction of capital expenditure incurred towards building and operating a new hospital with at least 100 beds for patients. In this regard, the government is recommended to enhance the weighted deduction to 150 per cent or higher of the capital expenditure and extending such benefit to all hospitals instead of hospitals having a minimum capacity of 100 beds. With an increase in healthcare infrastructure, corresponding increase will also be required in the number of healthcare workers and hence the need to incentivise skill development to bridge the huge skill gap and provide a weighted deduction of 150 per cent of expenses incurred on skill development in the sector (hospitals and diagnostic centres).
From an indirect tax perspective, the government is recommended to
(a) bring some critical / life-saving drugs (which currently attract 12 per cent GST) within the ambit of goods that attract 5 per cent GST rate
(b) accord the status of zerorated services to healthcare services (which are currently exempt) so that the procurement taxes in the hands of healthcare establishments do not form part of their operating cost. This will have a direct impact on the pricing of healthcare services and healthcare establishments will be able to provide services at lower prices while ensuring their margins and
(c) rationalise GST rate for health insurance services (currently taxed at a high rate of 18 per cent GST), considering it is a need of the hour.
While it is encouraging to see the government has already started taking steps in the right direction by introducing production-linked incentive scheme and the scheme on promotion of bulk drug parks, there is still the need to address industry issues by following an inclusive approach and rewarding the healthcare sector for all its vital contribution in safeguarding the country from an invisible enemy.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.