|
Pharmexcil seeks feedback on inverted duty structure impact, tax reforms to boost domestic manufacturing
|
|
Shardul Nautiyal, Mumbai
August 28 , 2025
|
|
|
In order to boost domestic pharma manufacturing, the Pharmaceuticals Export Promotion Council of India (Pharmexcil) has urged its member exporters and pharmaceutical companies to provide detailed inputs on the challenges arising from the prevailing inverted duty structure. The call for action is also aimed at supporting a broader initiative to recommend tax reforms to the Department of Revenue (DoR) under the Union ministry of finance.
Speaking on the matter, Raja Bhanu, director general of Pharmexcil, highlighted a critical issue impacting the cost-competitiveness of domestic production. “The prevailing customs duty structure is creating economic challenges for domestic manufacturing. Specifically, the import duties on raw materials and inputs, such as active pharmaceutical ingredients (APIs) and medical device components, are significantly higher than those on finished formulations and finished devices respectively. This disparity is impacting the cost-effectiveness of domestic production.”
To illustrate the problem, he pointed out that commonly used APIs like ibuprofen and paracetamol face a 10% import duty, while finished pharmaceutical formulations, such as tablets and syrups, are taxed at a significantly lower 5%. This makes importing finished formulations more cost-effective than domestic production using imported APIs.
"This inverted duty structure not only inflates production costs but also places domestic manufacturers at a disadvantage in the export market. The issue is systemic and requires targeted reforms. We are urging our members to identify specific products where these inverted structures exist and to share their operational and financial implications,” Raja Bhanu further stated.
The data collected and recommendations from industry stakeholders is being done to present a consolidated representation to the DoR. Suggestions have also been invited for practical remedies, including the rationalization of customs duties to create a more level playing field for domestic manufacturers.
Member companies have been urged to submit updated lists of affected products and provide feedback on how the current duty structure is impacting their production costs, export capabilities, and overall business viability.
This initiative is aimed at supporting policy measures that strengthen the Indian pharmaceutical industry, which is a vital contributor to both domestic healthcare needs and global supply chains.
Inverted duty structure is a phenomenon caused due to the difference in tax rates applied on the production of a good which uses imported materials as inputs. Inverted duties refer to a situation where the import tariff on inputs is higher than the tax levied on the final output.
When the tax rate on inputs used to produce goods or services is greater than the tax rate on the finished output, this is referred to as an inverted duty structure under GST. This discrepancy can result in the accumulation of excess Input Tax Credit (ITC), causing higher tax burdens, which may increase consumer prices. Such accumulation will have to be carried over to the next financial year till such time as it can be utilised by the registered person for payment of output tax liability.
|
|
|
|
|
|
|
|
TOPICS
|
The Food and Drug Administration (FDA), Maharashtra, has issued a public advisory urging citizens to report any misleadi ...
|
|
|
|
|