The pharmaceutical sector will be the biggest beneficiary of the GST as transportation of medicines/vaccines and related supplies that need cold chain distribution facilities will become hassle free, said Dr Piyush Gupta, Associate Director, GNH India.
Post the GST levy, there is a foreseeable change in the supply chain with companies opting for a single hub in a region depending on the volume of business. Even though all companies are working to adhere to the new tax regime, there are unforeseen challenges, he added.
Firstly, the GST Council has come up with its own version of HSN codes rather than implement the existing one. This has further complicated matters which could have been avoided. If HS codes of customs are adopted, it will save considerable time and money as these are already in circulation.
Secondly there should be a simpler linkage of GST rate and the HSN code. If one was to look up an HSN code, the associated GST should be printed with it. Currently, only category rates are listed and users need to manually identify the right code leading to misinterpretation and error. For instance, GNH India was given different HSN codes for the same product supplied by 2 different companies, he said.
Prior to GST, the supply chain management was both complicated and cumbersome. India is a diverse market with each of its 28 states having its own indirect tax structure. If a company needs to enter a particular market, they are compelled to register as vendors and adhere to each state’s tax regime.
The government began its GST campaign in November 2016. GNH India registered for GST in January, 2017. There was adequate time for the pharmaceutical sector to comply and register. Ideally, a period of three to four months is adequate to purchase invoice formats and HSN codes that adhere to the new law. This is among the first reforms that the government implemented in 70 years. Therefore GST is a learning point for the government and there will be a marked improvement in the execution of future policies, he noted.
Supply chain for pharmaceuticals in the pre GST phase was fragmented with the complexity to comply with state VAT laws. At the moment post GST the supplies are moving as planned. But every company has worked on a distribution strategy to ensure it falls in line to comply. The big benefit is the cost saving which is key for companies to succeed. Currently the entire pharma sector is now focused on GST. After 6-9 months, there will be a better clarity on the technology requirements and related savings, said Dr. Gupta.