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Drug traders swallow bitter pill post GST October meet

Author: Rajyashree Guha/Thursday, October 12, 2017/Categories: TRACKING THE GST

Drug traders swallow bitter pill post GST October meet

With implementation of GST on July 1, 2017 there was a hope that medicines will become more affordable. More than two months have elapsed and the government has introduced a slew of measures, the latest on October 6, to bring relief to small businesses. But will these measures make drugs more affordable to end users or patients? Experts say that these measures are not just making it difficult for pharmacies in selling drugs, but also posing hazards to end users.

Introduction of GST subsumed a number of taxes including the Value Added Tax and excise duty. GST on allopathic medicines and other health related products have been categorised into three GST regimes of 12%, 5% and zero per cent. There is no GST on human blood and its components and contraceptives. This is in comparison to the earlier VAT, which was about 5% in most states, and excise duty, which was 6% of 65% of MRP. Effectively, medicines which had no excise duty but only VAT of 5% have seen no change in prices after implementation of GST. Whereas, medicines with VAT and excise duty of 9.5% have seen prices rise by 2.5% to 12%.

“Meanwhile, the changes announced by the government on GST are not matching with practice. Each drug has been placed in different slabs in the GST regime. There are 1,50,000 different medicines being sold across the country. Computing and calculating GST at different levels is leading to operational difficulties affecting the end-users which in this case are patients,” said NRKVN Kumar, chairman and managing director of Daxinsoft Technologies Private Ltd, a company providing strategy and solutions to business.

“Similarly, under GST returning drugs to the supplier becomes very difficult. That is because drugs have a shelf life of a couple of years. It becomes very difficult for the retailer to quote the invoice number of the purchase after a couple of years. To do away with losses, the chemists are trying to sell drugs even after its expiry date. The All India Chemists and Druggists Association has submitted a referendum to the government on this issue but it is yet to be addressed,” he said.

ML Gupta, managing director of Soft World India Private Limited based in Jaipur that provides software solution to firms in the healthcare and retail segment, said, “While municipal and clinical waste fall under zero per cent GST, pharmaceutical waste, which comprise expired medicines, is charged 12% GST. This should be brought down to zero per cent as well.”

“While chemists will benefit from the extension of compliance scheme to Rs 1 crore, it would have been better if the scheme was extended to Rs 1.5 crore. Lessening the burden on those falling in this bracket would in turn benefit the consumers as these traders cater to large masses,” he said.

Meanwhile, Kumar pointed out that some patients are facing a problem in returning drugs as well, post the GST. “Another problem is some patients buy medicines in bulk. When the dosage or the strength of the medicine changes, they return it to the pharmacist. But the pharmacist cannot do the same as the GSTN portal is currently not accepting any amount in minus. Hence pharmacies refuse to take back any drug from the patient,” Kumar said.

“The government should introduce changes once in 6 months or a year so that such operational difficulties do not crop up. These short changes are difficult to implement,” Kumar said.  

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