Medicine getting costlier in GST regime
Medicine getting costlier in GST regime:
The medicine industry was on the brief that the goods and services tax (GST) rate on life-saving drugs would be zero, even as it has been capped at 5 per cent and that of all other formulations at 12 per cent. The rates in GST regime are much higher than rates in current tax structure. Medicine industry plays a vital role in every country. So, as in India, medicines are very important source of living. It is also stated that the research-based pharma Industry hoped there would be a reduction in the tax incidence on pharmaceutical products. And believed that this reduction would have helped in reducing the medicine prices and impacted patients positively.
When talking about the important and most essential drugs that treat malaria, HIV aids, diabetes etc falls under 5% slab in the GST regime. And normally all other drugs fall in 12% slab. The tax on nicotine is fixed at 5 per cent, while nicotine gum comes in the 18 per cent slab. Active pharmaceutical ingredients, or raw materials, will be taxed at 18 per cent. Apart from this GST is bound to bring more of disruption to different sectors and industries. Apart from getting the rates higher it is also bringing in the different rules and regulations.
There are different distributors and retailers those have still not even registered for the GST. It is also stated by many pharmaceutical firms that In many states VAT on pharma products is on maximum retail price, which is on a single point. Due to this the distribution channel does not pay VAT. Thus, for them paying tax, coupled with three returns a month, is a tough task. But distributors and stockists are upset at the loss they might have to incur with the increase in the effective tax rate. The effective tax rate on formulations, now 9 per cent, has been increased to 12 per cent, and trader margins have been built into the tax rate. While companies such as Abbott and Cipla have decided to absorb the losses which traders might incur during the transition period, distributors are unhappy. Thus there are sectors where GST is affecting. And looking forward for all the affected areas and sectors of GST ahead.