Budget 2023: Impact On Healthcare Sector For the healthcare sector, the announcements prioritized on research and innovation, use of technology, skill development and medical education
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
On 1 February 2023, the Finance Minister (FM) tabled the last full Budget of the government ahead of the General Elections in 2024. The Budget proposals have been well curated to keep the focus on rural welfare, education, healthcare, incentives to MSMEs/startups and infrastructural investments.
For the healthcare sector, the announcements prioritised on research and innovation, use of technology, skill development and medical education. The total budget allocation for Ministry of Health and Family Welfare for FY 2023-24 has been kept at INR 89,155 crore, which is a 12.6% increase over revised budget estimates for last year.
The key announcements for the healthcare sector include setting up centers of excellence (CoE) to promote research and innovation in pharma, dedicated multidisciplinary courses for medical devices to create skilled manpower for medical technology, high-end manufacturing etc., making ICMR labs available for collaborative research and innovation by public and private sector, CoEs for artificial intelligence to include health as one of the focus areas. Further to provide impetus to start-ups, the government will bring the National Data Governance Policy to support research and innovation by start-ups, by enabling access to anonymised data. Also, a Unified Skill India Digital platform will be launched to facilitate access to entrepreneurship schemes.
From a tax perspective, not many amendments were proposed. Keeping in view the still nascent manufacturing capabilities in the life saving drugs and medical devices segment, the sunset of exemption/ concessional Basic Customs Duty on import of select lifesaving drugs and specified medical devices etc., has been extended by one/two years. Further, to incentivise eligible start-ups, the period of incorporation is proposed to be extended by 1 year to 31 March 2024. Also, the time period for relaxation in relation to carry forward and set-off of losses of eligible startups, in case of change in shareholding, has been increased from 7 years to 10 years. On the flip side, input tax credit (ITC) of GST paid on expenditure towards meeting corporate social responsibility (CSR) obligations, has been restricted. This is likely to impact CSR spendings on health care, which had become the most preferred area of CSR spends post the pandemic. Further, overruling the interpretations made by various courts, it is clarified that benefit or perquisite taxable as business income covers benefit or perquisites provided in cash.
Overall, two key themes steered the budget announcements for the healthcare sector. First one being increased focus on research and innovation to pave the way to develop cutting edge health care solutions and create state of the art healthcare infrastructure in the country. The other theme is to work towards strengthening the education infrastructure in the healthcare sector to create skilled workforce for the future to enable the country to be self-reliant in healthcare.
While the above were quite positive announcements, there were some critical misses, that disappointment the industry. Some key expectations the industry was hoping for,were the likely announcement of investment-linked incentives in the healthcare sector and tax concessions in the form of rate rationalisation under GST, especially for medical insurance premiums, lifesaving drugs and software used in medical devices, weighted deduction for expenditure incurred on in-house R&D activities, inviting foreign investments into R&D in healthcare sector, providing capital and tax incentives for expansion of small clinics into larger ones etc.
While the government seems to be moving in the right direction, the success lies in the effective and efficient implementation of the proposed schemes / announcements. The industry hopes that the government will take adequate steps to realise the desired objectives as laid down in the Budget proposals.
About the authors: Monika Arora is a Partner at Deloitte India; Pankaj Grover is a Director at Deloitte Haskins and Sells LLP; Namrata Arora is a Director at Deloitte Haskins and Sells LLP and Kanika Dhawan is a Manager at Deloitte Haskins and Sells LLP