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8 April 2023: Drugs for rare diseases get customs duty relief

Context: The Union Government, through a general exemption notification, has given full exemption from basic customs duty on all drugs imported for personal use for the treatment of rare diseases listed under the National Rare Disease Policy 2021 and food for special medical purposes.

Background: All drugs and food for special medical purposes imported for personal use for the treatment of all rare diseases listed under the National Rare Disease Policy 2021 are exempt from basic customs duty by the central government. The government has also completely exempted pembrolizumab (Keytruda), used in the treatment of various types of cancer, from basic customs duties.

Duty Exemption Matter

On March 28, Congress leader and Thiruvananthapuram MP Shashi Tharoor shared the story of a young couple who approached him for an exemption from duty for medicine. It was imported for their young daughter, who was suffering from cancer, and they said they were unable to pay a high fee for it.

“He scrutinized, saved, borrowed, and crowd-funded to raise the required funds, but when he imported the drug, he needed an additional Rs 7 lakh for GST, which he could not afford. When they approached me, I wrote a letter to Finance Minister Nirmala Sitharaman on March 15 seeking her help in exempting them from GST on humanitarian grounds. When no reply was received, he contacted me again on Sunday (March 26). The injection was stuck at the Mumbai airport, but the customs would not release it without GST payment.

Working Structure of the New Duty Exemption System

In a notification that came into force on March 30, the Central Board of Indirect Taxes and Customs (CBIC) has provided exemptions by substituting “drugs, medicines, or food for special medical purposes (FSMP)” with the words “drugs or medicines”.

Now, to avail of this exemption, the individual importer has to submit a certificate from the central or state director of health services or the district medical officer or civil surgeon of the district, a release from the finance ministry said.

“While exemptions have already been provided to drugs specified for the treatment of spinal muscular atrophy or Duchenne muscular dystrophy, the government may also wish to extend customs relief to drugs and medicines used in the treatment of other rare diseases.” Many representations are being received, demanding treatment. Medicines or special foods required to treat these diseases are expensive and need to be imported. It is estimated that for a child weighing 10 kg, some rare The annual cost of treatment of diseases can range from Rs 10 lakh to more than Rs 1 crore per year, with treatment lasting a lifetime and drug dosage and cost increasing with age and weight. This exemption will result in considerable cost savings, and the patients will get much-needed relief.

Tax Imposition on Life-saving Drugs and Medicines

Drugs and medicines generally attract a basic customs duty of 10 per cent, while certain categories of life-saving drugs and vaccines attract a concessional rate of 5 per cent or nil. In its meeting held in September 2021, the GST Council reduced the tax rates on many life-saving medicines. Life-saving drugs Zolgensma and Viltepso used in the treatment of spinal muscular atrophy were exempt from GST when imported for personal use. At that time, the GST rate for Keytruda was reduced from 12 per cent to 5 per cent.