Impact Of GST On Pharma Products Prices

Impact Of GST On Pharma Products Prices – The Indian Pharma industry is one of the largest industries in terms of volume. Our country has been termed 3^rd in terms of volume and 14^th in terms of size. The multi-crore industry has been providing the world with affordable yet genuine and qualitative medicines.

The Government of India has been surprising the country with new forms of laws being introduced regularly. Goods and Service Tax (GST) has been taking the country by storm. If you are a person belonging to the pharma industry, then you must be curious to know the impact of GST on pharma products prices.

GST Impact On Pharma Companies

The effect of GST on pharma industry has been an overwhelming one. Many pharma companies have benefitted by the law change but many have undergone losses. The application of uniform GST rates slab has brought the industry to make huge changes. Here take look at the impact of GST on the pharma industry:

1. Additional benefits like bonus, discounts, free drugs sample etc along with inter-state transfer have become costlier due to phases of the supply chain.
2. Manufacturing of pharma products has become less costly due to reduced taxation.
3. Freedom to companies to explore strategic supply chain and distribution channel.
4. Abolish of troubles related to CENVAT CREDIT as GST charges a single rate for all goods and services.
5. 60 percent increase in indirect tax paid by pharma companies.
6. 4 percent MRP increase post-GST. Thus, leaving a Tax rate of 15% which is said to be 18% for diagnostics and reagents.

Impact on Current Tax Law on Pharma Drugs, Medicines and Products

The Value Added Tax (VAT) rate being paid by companies was 5 percent and formulation 9 percent with excise duty on product 12.5 percent. The rate could be applicable in maximum retail price. Special economic zones (SEZ) have been introduced to provide the relief for small manufacturing entrepreneurs. These excise-free manufacturing zones provide concessions and benefits. The difference of these excising free zones was high with 1.5 percent for those excise duty-free zones and 12.5 percent for other places. 37 returns had to be filed on timely taxes for the distribution channel.

With GST in effect, there has been major changed in the indirect taxation system. The cascading effect has come to a haul. One single tax would be required to be filed. The effect has resulted in a chain of reaction from different pharma industries. Like Ayurvedic drugs and medicines shared a VAT of 4% and 1.5% under excise-free zone benefits could need to file a rate of 12 percent.  The distribution channel which earlier was not involved in filing tax returns or paying tax will need to fist register and file a min of 37 returns post GST. The government of India has been making amendments ion GST make sure that everyone gets a fair share.

GST on Medicines, Pharma Drugs and Pharma Products 2017

The Pharma industry has been affected a lot by the decision of changing the taxation system. The impact of GST on pharma products price has come as a profit for many and as a loss for many. Here is a tentative list of pharma products being listed in the slabs of GST rates applicable after 1 July 2017.

NIL GST rate: The medicines and products related to human blood and its components along with all types of contraceptives have been listed under the slab of nil rate post-GST.

5% GST rate: Mostly the pharma drugs have been under this slab. They are as follows:

• Blood Vaccines for Animal or human
• Cyclosporin
• Desferrioxamine Injection or Deferiprone
• All types of Hepatitis Diagnostic Kit
• Drugs or medicines specified in the list 3 or 4 of notification 12/2012
• Formulations manufactured from bulk drugs listed in the list 1 of notification 12/2012 -central excise
• Medicines (including veterinary medicines) used in biochemical systems and not bearing any brand name
• Oral Rehydration Salts

12% GST rate: These products, medicines and pharma drugs which have not been specified anywhere is mostly subjected to 12 percent.

1. Forms or packing for retail sale regarding surgical, dental or veterinary purposes
2. Medicines including Ayurvedic medicines made by mixing two or more products/ constituents for therapeutic or prophylactic uses.
3. Pharmaceutical medicinal goods specified such as dental adhesion barriers, sterile laminaria, etc.
4. Bandages, Wadding gauge, and similar articles.

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Conclusion:

The pharma industry is known to provide medicines, pharma drugs, and products for a wide range of therapeutic and non-therapeutic areas. The industry contributes 5 percent to the country’s GDP. The industry is growing faster than ever with a rapid growth of 15 percent attaining the Pharma Vision 2020 goal. By the end of this year 2017, the size of the industry is said to be USD 150 billion. The change in indirect taxation system through GST has to lead to a change of effects which is hoped to be positive for all companies in this industry.