The Karnataka pharma industry and pharmacy trade do not foresee any long term impact under the goods and services (GST) regime. The industry is expected to see a fall in the input cost during manufacture of pharmaceuticals with the implementation of the GST. In the case of formulations, the GST levy is 12 percent as against 9 percent because in every state the tariff is different. For the active pharmaceutical ingredients (APIs) the levy is 18 per cent as against the current 17 per cent.
According to Sunil Attavar, president, Karnataka Drugs and Pharmaceuticals Manufactures’ Association (KDPMA), the rate of 12% for formulations is in line with our expectations. We do not see any major long term impact on the Industry. There may be an increase in prices by around 2.5 to 3% as the current taxes are approximately 9%.
“We were expecting a lower tax of 5% or exemption on generic medicines to support our Prime Minister’s mandate for high quality affordable drugs for the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) initiative to extend the reach of medicines to the population within their means,” added the KDPMA president.
“We need to wait for the finer details of the GST transition provisions to know the short-term impact on stocks in the market and those products under production. These could affect purchases immediately in the months before and after GST starts which is from July 1, 2017, said Attavar.
From the pharma trade perspective, V Hari Krishnan, president, Bangalore District Chemists and Druggists Association said that the one nation one tax regime is the best that could have happened to the country. We welcome it and want the tax credits of excise and value-added tax (VAT).However, the government must ensure to re-fix of ceiling price on NLEM (National List of Essential Medicines ) formulations to the provisions of GST incorporated as wholesale and retail trade margins to 10 percent and 20 percent respectively on PTR (price to retailer) inclusive of GST.
Moreover in Karnataka, VAT is charged on MRP and the wholesalers have to pay this to the first sellers of the state which includes C&F agents and super stockists. Therefore, the first sellers of the state are the VAT payers to the government. This is collected from the wholesalers and retailers where the VAT is charged on MRP. Therefore the tax credits of the excise duty and VAT on the closing stocks has to be received from the state or central government. So the component of MRP printed on the pack should clearly specify the rate of MRP and GST as extra. This is because the small traders cannot bill to the customer arriving on the abetted margin, said Krishnan.
The Association on May 31, 2017 is also conducting a seminar and workshop on GST for the pharmacy trade where Ritvik Pandey, commissioner of commercial taxes, government of Karnataka is expected to participate, he said.