HEALTH CESS

[Mr. M. GOVINDARAJAN]

Budget speech

The Finance Minister, in her Budget speech, proclaimed the introduction of Health Cess, a new Cess to be levied in the current financial year.  In her speech she told that India made considerable progress in medical equipment too. Till few years back we were dependent on imports for medical equipment.  Now, not only India is manufacturing medical equipment but also exporting them in large quantities. This sector deserves further fillip. Government has also been committed to provide health services to all. Ayushman Bharat has made it possible. To achieve the twin objectives of giving impetus to the domestic industry and also to generate resource for health services, she proposed to impose a nominal health cess, by way of a duty of customs, on the imports of medical equipment keeping in view that these goods are now being made significantly in India. The proceeds from this cess shall be used for creating infrastructure for health services in the aspirational districts.     

Health Cess at the rate of 5% is proposed to be imposed on the import of medical devices. This Health Cess shall be a duty of Customs. Health Cess shall not apply to medical devices which are exempt from BCD. Further, inputs/parts used in the manufacture of medical devices shall also be exempt from Health Cess. The proceeds of Health Cess shall be used for financing the health infrastructure and services.

Health cess

Chapter V of the Finance Bill provides for the levy of health cess.  Clause 139(1) of the Finance Bill provides that in the case of goods specified in the Fourth Schedule being goods imported into India, there shall be levied and collected for the purposes of the Union, a duty of customs, to be called the Health Cess, at the rates specified in the said Schedule, for the purposes of financing the health infrastructure and services.

Fourth Schedule

The Fourth Schedule to the Bill indicates that all goods falling under headings 9018, 9019, 9020, 9021 and 9022 of the First Schedule to the Customs Tariff Act, 1975 shall be liable for health cess leviable @ 5%. 

The rules for interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), the Section Notes, Chapter Notes and the General Explanatory Notes of the said First Schedule shall apply to the interpretation of this Schedule.

Exemption to health cess

Vide Notification No. 08/2020-Customs, dated 02.02.2020 the Central Government, on being satisfied that it is necessary in the public interest so to do, exempts the goods of the description specified below and falling within the First Schedule to the Customs Tariff Act, 1975, from the whole of the Health Cess leviable thereon under the said clause of the Finance Bill:

• All goods falling under heading 9022, other than those for medical, surgical, dental or veterinary uses.
• All goods on which exemption is claimed and allowed under the following notifications-

• Notification No. 74/2005-Customs, dated the 22nd July, 2005, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 499(E), dated the 22nd July, 2005;
• Notification No.10/2008-Customs, dated the 15th January, 2008, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 33(E), dated the 15th January, 2008;
• Notification No. 152/2009-Customs, dated the 31st December, 2009, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 943(E), dated the 31st December, 2009;
•  Notification No. 46/2011-Customs, dated the 1st June, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 423(E), dated the 1st June, 2011;
• Notification No. 53/2011-Customs, dated the 1st July, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 499(E), dated the 1st July, 2011; and
• Notification No. 69/2011-Customs, dated the 29th July, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 593(E), dated the 29th July, 2011.

• All goods covered under S. Nos. 216, 216A, 561, 562, 564, 565, 566, 567, 568, 570, 571, 573, 574, 578, 578A, 580 and 581 of the Table annexed to the Notification No. 50/2017-Customs, dated the 30th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 785(E), dated the 30th June, 2017.

Utilization of health cess

Clause 139 (2) of the Finance Bill provides that the Central Government may, after due appropriation made by Parliament by law in this behalf, utilize such sums of money of the Health Cess levied under this Chapter for the purposes specified in sub-section (1), as it may consider necessary.

Valuation

Clause 139 (3) of the Finance Bill provides that for the purposes of calculating the Health Cess under this Chapter on the goods specified in the Fourth Schedule, where such duty is leviable at any percentage of its value, the value of such goods shall be calculated in the same manner as the value of goods is calculated for the purpose of customs duty under the provisions of section 14 of the Customs Act, 1962.

Health cess is an additional duty

Clause 139 (4) of the Finance Bill provides that the health cess shall be in addition to any other duties of customs chargeable on such goods under the Customs Act or any other law for the time being in force.

Applicability of Customs provisions

Clause 139 (5) of the Finance Bill provides that the provisions of the Customs Act and the rules and regulations made there under, including those relating to refunds and exemptions from duties, offences and imposition of penalty, shall, as far as may be, apply in relation to the levy and collection of the Health Cess leviable under this Chapter in respect of the goods specified in the Fourth Schedule as they apply in relation to the levy and collection of duties of customs on such goods under the said Act or the rules or the regulations made there under, as the case may be.