Foreign Direct Investments (FDI) in Healthcare & Diagnostics Sector in India-2: Lawyers Advice
Company Registrations, Compliances, Licenses & Permits which are to be procured:
• Registration with the State specific Authority as a private medical establishment.
• Registration under the Shops and Establishment Act, specific to the State.
• Registration under various Labour Laws.
• Registration under Pre- Conception and Pre-Natal Diagnostic Techniques Act, 1994
• Registration under various direct and indirect tax legislations.
• Possession of Narcotic drug License.
• License for operating of X-ray machines, CT scan.
• License for possession of denatured spirit.
• License to obtain drugs and operate a blood bank from Food and Drug Administration (FDA).
• The entity must remain compliant with the Medical Termination of Pregnancy Act, 1971.
• Fire License ensuring fire safety compliance.
• Authorization for creation of a facility for generation, collection, transport, storage of bio-medical waste under the Bio-Medical Waste (Management and Handling Rules), 1998.
• A certificate must be provided by the investor and investee, along with an application for foreign investment as per Annexure 10 of the FDI Policy.
• Proper due diligence must be conducted regarding registration of the above licenses and permits.
• If foreign investors are investing in shares then they must read that particular entities past, present financial status and future affairs.
• The investor must ensure the necessary compliances with the Medical Termination of Pregnancy Act 1971, Pre-conception and Pre-natal Diagnostic Techniques Act 2003, Biomedical Waste Disposal, Drugs and Cosmetic Acts for pharmacy and Atomic Energy Regulatory Board, are made so that it does not affect the functionality of the hospital.
Functioning and Management of the Hospital Services:
• Management of Registration and Record keeping services of patients.
• There must be proper functioning of material services or stores like Pharmacy stores, Clinical stores, Surgical stores, Glassware stores, Hardware and Sanitary stores, etc for proper functioning of the hospital.
• Transport services are also essential to transport supplies or shifting patients, etc.
• For effective functioning of a hospital, regular repairs and maintenance of the building, furniture, fittings and other machines and equipment’s are essential.
• Management of hospital security service is necessary for protection of patients, staff and all valuable things.
• Income Tax for the healthcare sector is levied under the Income Tax Act, 1961. A non-resident entity is taxed only on income that arises from its sources in India.
• A non-resident entity is taxed at the rate of 40%, while resident companies are taxed at the rate of 30%.
• Healthcare services in India are exempted from Goods and Services Tax (GST).
• In India, exports of medical devices in 2019 grew by 29% and imports of medical devices grew by 24%.
• The Indian has an estimated $9 billion market of medical devices and it is further expected to exceed to $14 billion by the end of 2025. This industry acts as an attractive export sector for many United States firms, which benefits India by U.S accounting for one quarter of exports to India.
• In 2019, Apollo Hospitals Group and Microsoft India entered into an agreement to set up a Committee for National Clinical Coordination for Artificial Intelligence (AI)- powered Cardiovascular Risk Score Application Program Interface (API).
• Fortis Healthcare approved the de-merger of its hospitals into Manipal Hospital Enterprises Private Limited, in India.
• Mergers and Acquisition deals in India in the hospital sector, have recorded around Rs. 7,615 crores in 2019.
• The acquisition of Bhilai Scan and Research (BSR) Pvt. Ltd. by TriCountry Premier Hearing Services was approved in 2019 by the National Company Law Tribunal (NCLT) for Rs. 67 crores.
Authored By: Adv. Anant Sharma