GST Impact on Pharma Product Price – Are you looking for GST impact of medicines rates? Want to know the effect of GST rates of pharma medicines and drugs? GST has brought loads of confusions and hustle for the pharma companies. The GST has started to play and take its shape. The initial impact has been neutral. In this post, we have discussed the GST impact on pharma product price.
The Impact Of GST on Pharmaceutical Products Price
The Indian Pharma industry has been cherishing good growth since patent act and economic liberalization. The taxation procedure for many pharma manufacturers and companies were complex. Like an average VAT attracted 5 percent, formulation 9 percent and excise duty on product 12.5 percent. This totaled up a good part of the profit and making when charged on maximum retail price. The government introduces special economic zones (SEZ) which provided excise duty-free manufacturing. This ultimately boosted and shaped the Indian pharma industry of today.
The act of Goods and services tax (GST) has made the taxation simpler. The rate is fixed into slabs for every medicine were into questions. This meant every medicines or drug have subjected some rate which will be discussed later in the post. As per a report, 80 percent of medicines were subjected to 12 percent tax from 9 percent. The rise in medicines and drugs tax means a rise in prices to meet the profit margin.
National Pharmaceutical Pricing Authority (NPPA) has said to re-revise over 761 drugs to make them affordable for the general public and company also. The biggest issue being neglected by many is the raw material is also subjected to tax. It has attracted 18 percent tax on Active pharmaceutical ingredients or raw materials. The raw material and finished good taxation have left the companies has huge disparities. This can lead to bad quality medicines and costly medicines if the tax on medicines increases.
Rates of GST Slabs For Various Pharma Drugs, Medicines and Products
Goods and Sales Tax (GST) rates on various pharma drugs have been the topic for months. The taxes have been different for companies of various genres. This meant to classify drugs on essential, important, life-saving etc. The slabs of GST rate for various drugs came up as a shock for many pharma companies.
The companies had to pay more or fewer taxes as compared to previous fiscal years. This brought upheaval and dilemma for many pharma companies. Those manufacturing companies which are set up in excise duty-free zones had been enjoying good taxation concession benefits for many decades. This can also mean limiting the excise duty-free zones or increasing the rates there. The small pharma companies can face a lot of losses due to this.
Here is the tentative list of drugs and their rate slab currently (It is subjected to change as per re-revision by NPPA):
Drugs Falling Under NIL GST rate: These drugs have been listed has essential and life-saving. These include medicines and products related to
- Human blood and its components
- All types of contraceptives
Drugs Falling Under 5% GST rate:
These include the following drugs and products which are as follows:
- All types of Hepatitis Diagnostic Kit
- Animal or human Blood Vaccines
- Desferrioxamine Injection or Deferiprone
- Drugs or medicines (as specified in the list 3 or 4 of notification 12/2012)
- Formulations manufactured from bulk drugs (as listed in the list 1 of notification 12/2012 -central excise)
- Medicines (including veterinary medicines) used in biochemical systems and
- Medicines without bearing any brand name
- Oral Rehydration Salts
12% GST rate:
As per a report, 80 percent of drugs fall into this category. Many of them have been sent for revision. Mostly, the drugs and medicines not specified anywhere are listed here.
- Bandages, Wadding gauge, and similar articles.
- Forms or packing for retail sale regarding surgical, dental or veterinary purposes
- Medicines including Ayurvedic medicines made by mixing two or more products/ constituents for therapeutic or prophylactic uses.
- Pharmaceutical medicinal goods specified such as dental adhesion barriers, sterile laminaria, etc.
Every new law needs time to shape up and GST is still a new concept of taxation for many. The government of India is trying to make medicines and drugs availability affordable as far as possible. The Pharma vision 2020 is still attainable with better improvement in GST rate slabs.