The much awaited GST which will roll out from July 1 is expected to bring down pharma companies' physical distribution costs to below 2% of sales, thus benefiting the customers by making health care affordable and simultaneously improving profitability.
Currently the physical distribution costs of healthcare and pharma sector is between 3 to 5% of sales. Taking advantage of provisions under GST, the healthcare and pharma industry can actually decrease their physical distribution costs in the country to below 2% of sales. This will consequently lead to a decline in healthcare cost, said Rajesh Pednekar, an international expert in pharmaceutical supply chain.
Due to various challenges overseas, pharmaceutical companies in India are under tremendous pressure to improve their operational efficiencies, in both the areas of manufacturing and supply chains to spruce up their profitability. GST will help the pharmaceutical companies in rationalising their supply chain and subsequently bringing down distribution cost, said Pednekar, who has been adjudged among top 50 influencers in Supply Chain in Asia-Pacific by Terrapin Singapore.
To rationalise supply chain, the companies will need to critically review their strategy and distribution networks across the country. GST will also have positive effect on warehousing strategy. Currently most of the pharma manufacturing companies maintain their warehouses in different states in order to avoid central sales tax (CST) of different states. So with the introduction of GST, manufacturers can set their warehouses at their strategic locations as they no longer have to look for saving CST. GST would also enable a flow of seamless tax credit, improve the overall compliance, etc, he opined.
An amalgamation of all the taxes into one uniform tax will ease the way of doing business in the country, as well as minimise the cascading effects of manifold taxes that is applied to one product.
Though the actual impact of GST on healthcare and pharma industry will be known in a short while, all seem to be confident that post implementation of GST, customers and industry players will be in a win-win situation, he conculded.