GST on Prosthetic Limbs: Accessibility is not charity, it's a right !
Introduction
In the evolving framework of Goods and Services Tax (GST) in India, a pertinent debate continues to unfold - should prosthetic limbs and other essential assistive devices attract any tax at all? While the tax rate on prosthetic limbs was reduced from 12% to 5% in India, questions remain whether even this nominal tax is ethically and economically justified. These devices are not luxury goods or optional purchases; they are often the very foundation for mobility, independence, and dignity for persons with disabilities (PwDs).
Is it just to impose a tax - however small - on something that restores a person’s basic right to walk, work, and live with autonomy? This article explores this critical issue, juxtaposing India’s GST treatment with international practices, ethical arguments, and economic rationale.
Current GST Structure on Prosthetic Limbs in India
Under the current Indian GST regime:
Prosthetic limbs, orthopedic appliances, and similar aids are taxed at 5% (Notification No. 1/2017-Central Tax (Rate), S. No. 256 as amended).
Wheelchairs, Braille watches, hearing aids, and a few other items are either exempted or taxed at 5%, depending on classification.
However, raw materials used in manufacturing prosthetics - such as high-grade aluminum, carbon fiber, and microprocessor-controlled components - are taxed at higher rates (12% to 18%), leading to inverted duty structure and unclaimed Input Tax Credit (ITC).
The result? While the end product is taxed at 5%, the cost of production increases due to cascading tax effects on inputs, capital goods and Input services which manufacturers can't fully claim back.
The Ethical Argument: Taxing Dignity
Prosthetics Are Not Luxury Items
Prosthetic limbs enable fundamental human capabilities-walking, working, social participation, and independence. Imposing a tax on these is akin to penalizing disability.
Taxation on prosthetic limbs is not merely a financial matter but a moral and constitutional issue. Article 41 and Article 46 of the Indian Constitution obligate the state to provide assistance to the disabled, not place fiscal burdens on their rehabilitation.
Discrimination Through Taxation
The burden of GST on prosthetics results in an indirect form of discrimination, making rehabilitation costlier for those already facing social and physical limitations. It violates the spirit of:
Article 14 (Equality before Law)
Article 21 (Right to Life and Dignity)
Taxing prosthetics contradicts India’s commitment under the UN Convention on the Rights of Persons with Disabilities, which promotes accessibility and affordability of assistive technology.
International Practices: A Comparative Lens
Let us consider how other countries treat prosthetics and similar assistive technologies under their tax regimes:
1. United Kingdom
Zero-rated (0% VAT): Under the UK's Value Added Tax (VAT) Act, artificial limbs and other medical appliances for disabled people are zero-rated.
The rationale is clear: healthcare and disability aids are essential services, not taxable goods.
2. Australia
GST-Free: Australia classifies artificial limbs and orthopedic appliances as GST-free under the A New Tax System (Goods and Services Tax) Act 1999, Schedule 3.
Further, devices specifically designed for people with an illness, injury or disability are included in the exemption.
3. Canada
Prosthetic devices are zero-rated under the Excise Tax Act.
This includes artificial limbs and any prosthetic or orthotic device prescribed by a qualified medical practitioner.
4. United States
While the US does not have a federal GST, most states exempt prosthetics from sales tax.
Medicare and Medicaid fully cover the cost of many prosthetic devices.
5. European Union
VAT Directive 2006/112/EC allows member states to apply reduced or zero rates to medical equipment including prosthetics.
Countries like Germany and Sweden offer reduced VAT, while others like Ireland may fully exempt such devices.
6. South Africa
Prosthetic limbs are zero-rated under the Value-Added Tax Act as they fall under medical goods essential for rehabilitation.
Indian Judicial & Parliamentary Standpoints
There have been multiple representations from disability rights activists, NGOs, and even MPs urging the GST Council to exempt prosthetic limbs completely. The Standing Committee on Social Justice and Empowerment in 2018 also recommended zero-rating or exemption for assistive devices.
No major court ruling has yet declared GST on prosthetics as unconstitutional, but public interest litigations could soon challenge this on grounds of discrimination and unequal access.
Economic Implications
Proponents of GST on prosthetics argue that:
A nominal tax helps maintain uniformity in the tax code.
Revenue collected helps in funding government-run disability schemes.
However, this rationale is flawed:
The total revenue from prosthetics is negligible compared to the cost borne by users.
A waiver on GST could stimulate demand, improve affordability, and promote local manufacturing.
Government schemes like ADIP (Assistance to Disabled Persons) already provide subsidized devices - taxing prosthetics only increases the government’s own cost of procurement.
Impact on the Disabled Community
A Prosthetic Limb Is a Life Reboot
A basic below-knee prosthetic costs between Rs. 10,000 to Rs. 50,000; an advanced bionic limb can cost upwards of Rs.5 lakhs.
A 5% GST adds Rs. 500 to Rs. 25,000 in taxes depending on the device.
Who Bears This Cost?
Persons with disabilities, many of whom come from lower socio-economic backgrounds.
NGOs and charitable trusts offering free prosthetics also bear the burden, as input costs rise with non-refundable ITC.
Loss of Opportunity
The inability to afford quality prosthetics results in job loss, missed education, reduced mobility, and dependence on caregivers or the state.
The real cost is not Rs. 500 tax on a Rs. 10,000 limb - it's a missed job, a lost opportunity, a life of dependence.
Way Forward: Policy Recommendations
To ensure that India's tax system aligns with its constitutional and humanitarian values, the following changes are suggested:
1. Full GST Exemption: Prosthetic limbs and all mobility aids should be fully exempt from GST, both on outputs and critical inputs.
2. Refund of Input Tax Credit to Manufacturers: Until full exemption is granted, an inverted duty refund mechanism, providing refund on capital goods and input services along with inputs, must be provided to manufacturers.
3. Separate HSN Codes for Disability Aids: To ensure clarity and uniformity, a dedicated classification under HSN for assistive devices should be implemented.
4. Inclusion in Essential Services List: Prosthetic limbs must be treated on par with life-saving drugs and exempted entirely from taxation.
Conclusion
A society's progress is measured not merely by its GDP or tax collection, but by how it treats its most vulnerable citizens. Taxing prosthetic limbs - even at 5% - raises a fundamental moral dilemma. No one should be taxed for wanting to walk, work, or live with dignity.
India must move toward zero-rating or full exemption of prosthetic limbs, aligning its GST policy with global best practices and its own constitutional promise of equality and inclusion. In the words of disability advocates worldwide: accessibility is not charity, it's a right - and rights must not be taxed.
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.