It’s been four years since the Goods and Services Tax (GST) came into effect from 1st July, 2017. Since then, so much has changed in the tax regime.
In a recent development, the GST Council reduced the rates of COVID essentials, including drugs for treatment and other related items. To understand the pharma industry’s stakeholders’ point of view in this regard, Express Pharma gathered the reactions from some of the experts and veterans who have been observing, analysing, and playing an important role in the development of such decisions, while keeping a close eye on all that the industry has been going through for years. Read on:
The decision could have been taken till December 2021 or March 2022
There are two things – availability and affordable availability of a product. During a pandemic, affordable treatment is a necessity. Hence, the slashed GST rates on COVID-related items is a welcome move that has been taken by the government. However, it would have been better if the decision would have been taken till December 2021 or March 2022. Hopefully, the government will consider the same. Nevertheless, the country is going through tough financial times and the government would not like to lose the momentum. So, March 2022 should be a good enough time because companies need time to plan and come up with their products.
Further, since vaccines are primarily bought by governments, five per cent GST on these doesn’t make an impact because ultimately, it is just balancing the accounts from one side to another. At present, patients are getting impacted because of the price of the medicines. The GST reduction is for benefitting the consumers. So, whatever the deduction is, the benefit will be passed on to the consumers. However, there are still many COVID-19-related products that are left, on which the GST rates haven’t been slashed. All those products – like Favipiravir, Itolizumab, etc. should be included and the GST rates can be kept at five per cent.
– Sudarshan Jain, Secretary-General, Indian Pharmaceutical Alliance (IPA)
A welcome step
Reduction in tax rates on COVID-related items is a welcome step. The move is in line with tax concessions on such items by many countries such as Australia, France and other countries in the EU which had waived taxes and duties on such items last year and have further extended them in the current year. It will definitely come as a relief to the patients as they will not be charged with GST at the rate of five to 12 per cent, which was usually applicable on such medicines. Moreover, with amendments in the GST law, the vaccines could have been notified as a ‘zero rated’ supply (like exports and supplies to SEZ) where the benefit of input tax will be available to the vaccine manufacturers. Treating them as ‘zero rate’ supply instead of upfront exemption would have ensured that there is no loss on account of input credit accumulation. Alternatively, waiving GST on the entire supply chain (raw materials, etc.) of vaccines could help lower their prices. Another measure could be by way of reimbursing GST on vaccines from utilising the PM CARES Fund. GST Council should proactively consider eliminating or slashing the tax rates on vaccines from five per cent.
After the concession/exemption in tax rates, some companies could find themselves under Inverted Duty Structure as input tax credit of taxes paid on their inward supplies might get accumulated due to lower tax liability on their output supplies. Medicines viz. Tocilizumab and Amphotericin B are now fully exempted from GST and consequently benefit of credit of taxes paid on their inputs get restricted – which push up costs. Hence, lack of rate rationalisation for the full supply chain and not treating medicines as ‘zero-rate could hinder companies from passing the full benefit to patients. While adjusting their prices, the industry must be mindful of the anti-profiteering watchdog called the National Anti-profiteering Authority (‘NAA’). Recently, the NAA has issued a memorandum with directions to the taxman to ensure that there is a commensurate reduction in prices of goods on which GST rates stands reduced. For the patients, however, a continuation of exemption is needed and expansion in its scope to cover other COVID-related items is desirable.
– Kumar Visalaksh, P...
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