As the July 1st deadline for implementation of GST is approaching fast, so far there is no clarity on reimbursement of losses suffered by drug wholesalers and retailers post GST.

Due to lack of clarity on who reimburse their losses on stocks, the drug traders have left with no option but to return old stocks to manufacturers. This will lead to shortage of drug supplies impacting patients considerably. The traders are required to sell drugs as per MRP fixed according to new tax regime.

All India Chemists and Druggists Association (AIOCD) is engaged in discussion with industry bodies like IDMA, OPPI, IPA to iron out minutiae and stop losses anticipated while transitioning to the GST. So far nothing has been finalised.

Drug wholesalers could incur 7 per cent loss while retailers could face 3-4 per cent loss due to revised tax rate under the GST regime. At present, taxes (Excise Duty + VAT) on a pharmaceutical product for retail sale works out to about 9 per cent of MRP (with the tax on inputs – bulk drugs at 12.5 per cent). The GST council has put most of pharmaceutical products under 12 per cent tax bracket.

AIOCD general secretary Suresh Gupta said “Once GST rolled out, we have to sell drugs as per MRP fixed according to the new tax regime. Due to this, wholesalers will suffer losses up to 7 per cent and retailers up to 4 per cent. Currently there is no clarity on who will reimburse our losses. The government has allowed pharmaceutical industry to avail credit of up to 40 per cent of their GST liability against excise duty already paid on stocks lying with drug traders when GST is implemented. They demanded that the government provide them 100 per cent credit, so that they can pass on benefit to traders.”

Jai Priye Prakash, Secretary, Department of Pharmaceuticals on Monday held a meeting with AIOCD, OPPI, IDMA etc to discuss GST implementation. Joint health secretary KL Sharma, NPPA chairman Bhupendra Singh, DCGI were also present at the meet. But no decision has been taken on the industry's demand for 100 per cent refund. Hence the traders' demand for compensation still remains in limbo.

Gupta, reiterating AIOCD stand, said “If compensation issue is not resolved, we will return stocks to manufacturers. Our demand is that wholesalers get 5 per cent of their three months' average sale and retailers get 3 per cent of their three months' average sale. Negotiation is still going on with industry bodies in this regard.”