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Karnataka pharma industry and pharmacy trade do not see any long-term impact under GST regime
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Nandita Vijay, Bengaluru
May 26 , 2017
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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.
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