Pharma industry is now waiting for more clarity on the final details on the Goods & Services Tax (GST) transition provisions.  Most distributors and retailers have commenced diminishing their stocks. Drug manufacturers too have trimmed down their production only to ensure that there is just adequate quantity of drug supplies to meet the demand from the pharmacy trade.

As we understand, in the absence of complete invoice details on the duties paid, there will be a 40% refund of the assumed duty paid. This will impact the retailers who usually have consolidated billing patterns. They have asked the pharma companies to reimburse the same. It will be tough for companies to clear-out the old products. However, we are waiting for more clarity on the final details for the GST transition, Sunil Attavar, president, Karnataka Drugs & Pharmaceutical Manufacturers Association (KDPMA) told Pharmabiz.

According to Shailesh Siroya, managing director, Bal Pharma, the industry is still not clear on the impact of the GST. The wholesalers basically the stockist have reduced their purchases as they do not want to hold inventory in their warehouses on the start date of GST since there is a slight ambiguity on whether credit of VAT and other taxes will be available.

Most stockists and retailers have started reducing their stock holding in a phased manner. Many companies have also reduced their monthly production requirements so that they hold just sufficient stocks, added Attavar.

The existing stocks are being liquidated to retailers as manufacturers are also uncertain about the credit of taxes they can avail in the closing stock. Also since there would be an impact on the prices, manufacturers are also not aware that the trade would return the same.

On whether it would be possible for the industry to clear the old products, Siroya, noted that it would be highly unlikely for the  stocks lying at various levels of trade to be liquidated completely.

“There would be a lot of stocks remaining. Also the uncertainty regarding non moving stocks return and availing credit is again not very clear leading to a lot of confusion in the trade,” he said.

On the  strategy to be adopted for the price variants with GST, Attavar pointed out that all drugs except lifesaving ones will come under the 12% duty structure. There will be an estimated marginal increase of approximatele 2.75% in the MRP. Many associations have asked NPPA to allow this increase.

"The new batches would definitely capture the whole impact of the variation. However existing stocks might be sold at old prices and manufacturers might reimburse the difference in margin if any to the trade by way of separate discounts or adjustments”, said Siroya.