Shuchi Ray, partner, Deloitte India; Indu Amar, director and Namrata Arora, senior manager, Deloitte Haskins and Sells LLP say that the steps proposed for the healthcare sector in Budget 2021 are encouraging but the true success lies in their quick execution
After witnessing the historical pandemic COVID-19, the Indian government announced the first digital Budget ever, which primarily focused on six pillars, with the first and foremost pillar being ‘healthcare and wellbeing’. With this post pandemic Budget, the expectations of the healthcare sector were high, and it was anticipated that the government would address the need to scale up healthcare facilities, increase public spending on health expenditure to achieve the objective of providing affordable healthcare services to every corner of the country. The expectations were also that tax holidays and incentives will be provided to the sector to gain a cutting edge and to promote Research and Development (R&D) and allied activities. Equally there were expectations regarding incentives / concessions on the GST front given these challenging and unprecedented times.
In this Budget, the investment on health infrastructure has increased substantially and the government has progressively committed to do more as the institutions absorb. The government has focused on strengthening three areas: Preventive, Curative and Wellbeing.
A new centrally sponsored scheme, ‘PM AtmaNirbhar Swasth Bharat Yojana’, will be launched with an outlay of about RS 64,180 crores over six years, for developing primary, secondary, and tertiary care health systems, strengthen existing national institutions, and to create new institutions, to cater to detection and cure of new and emerging diseases. This scheme will be in addition to the National Health Mission and the main interventions are as below:
- Support for 17,788 rural and 11,024 urban Health and Wellness Centers;
- Setting up integrated public health labs in all districts and 3382 block public health units in 11 states;
- Establishing critical care hospital blocks in 602 districts and 12 central institutions;
- Strengthening of the National Centre for Disease Control (NCDC), its five regional branches and 20 metropolitan health surveillance units;
- Expansion of the Integrated Health Information Portal to all States / UTs to connect all public health labs;
- Operationalisation of 17 new Public Health Units and strengthening of 33 existing Public Health Units at points of entry, that is at 32 airports, 11 seaports and seven land crossings;
- Setting up of 15 Health Emergency Operation Centers and two mobile hospitals; and
- Setting up of a national institution for One Health, a Regional Research Platform for WHO South East Asia Region, nine Bio-Safety Level III laboratories and four regional National Institutes for Virology.
Further, an amount of Rs 35,000 crore has been allocated for COVID-19 vaccine with a commitment to provide further funds.
While the government has substantially increased the public spending (Budget outlay for health and wellbeing is Rs 2,23,846 crores which is an increase of 137 per cent as compared to this year) and introduced some very important policy decisions, no sector specific direct tax amendment has been brought in by the government to provide tax holidays or incentives. Considering the recent shift to faceless mechanism for conducting the assessment and appeal proceedings, the major focus has been to reduce litigation by removing difficulties faced by taxpayers and rationalisation of various provisions such as clarificatory amendments to equalisation provisions, relief in Minimum Alternate Tax (MAT) and withholding tax requirements on dividends received by foreign companies, announcement of new Dispute Resolution Committee and scheme for faceless proceedings before the Income-tax Appellate Tribunal and reducing time limits for completion of assessment proceedings, filing of tax returns, initiation of assessment / re-assessment proceedings, etc.
As regards specific indirect tax amendments, the government has provided exemption from levy of Health Cess on medical devices imported by international organisations and diplomatic missions. As regards the changes in the Customs tariff, the government has re-grouped some existing Customs entries (in respect of goods relevant for the healthcare sector) and has also proposed amendments while keeping the Customs duty rate broadly the same. This seems to be a step towards the proposal of overhauling the Customs duty structure.
In essence, the government has incentivised the sector with more of non-tax benefits instead of tax benefits which were expected to be surrounding lower GST rate on health insurance services, critical / life -saving drugs, tax holidays and other incentives etc. With the measures and schemes announced, the economy is likely to witness innovation and overall growth in the healthcare sector with provision of timely and affordable health care services to all, generation of additional employment opportunities etc. While the government’s focus on developing healthcare infrastructure is reassuring, it is equally imperative that the proposals are implemented by the government faster so that the benefits can reach people at the right time. In a nutshell, the steps proposed by the government are encouraging, but the true success lies in their quick execution.