Impact Of GST On Pharma Products Prices – The Indian Pharma industry is one of the largest industries in terms of volume. Our country has been termed 3rd in terms of volume and 14th in terms of size. The multi-crore industry has been providing the world with affordable yet genuine and qualitative medicines.
The Government of India has been surprising the country with new forms of laws being introduced regularly. Goods and Service Tax (GST) has been taking the country by storm. If you are a person belonging to the pharma industry, then you must be curious to know the impact of GST on pharma products prices.
The effect of GST on pharma industry has been an overwhelming one. Many pharma companies have benefitted by the law change but many have undergone losses. The application of uniform GST rates slab has brought the industry to make huge changes. Here take look at the impact of GST on the pharma industry:
The Value Added Tax (VAT) rate being paid by companies was 5 percent and formulation 9 percent with excise duty on product 12.5 percent. The rate could be applicable in maximum retail price. Special economic zones (SEZ) have been introduced to provide the relief for small manufacturing entrepreneurs. These excise-free manufacturing zones provide concessions and benefits. The difference of these excising free zones was high with 1.5 percent for those excise duty-free zones and 12.5 percent for other places. 37 returns had to be filed on timely taxes for the distribution channel.
With GST in effect, there has been major changed in the indirect taxation system. The cascading effect has come to a haul. One single tax would be required to be filed. The effect has resulted in a chain of reaction from different pharma industries. Like Ayurvedic drugs and medicines shared a VAT of 4% and 1.5% under excise-free zone benefits could need to file a rate of 12 percent. The distribution channel which earlier was not involved in filing tax returns or paying tax will need to fist register and file a min of 37 returns post GST. The government of India has been making amendments ion GST make sure that everyone gets a fair share.
The Pharma industry has been affected a lot by the decision of changing the taxation system. The impact of GST on pharma products price has come as a profit for many and as a loss for many. Here is a tentative list of pharma products being listed in the slabs of GST rates applicable after 1 July 2017.
NIL GST rate: The medicines and products related to human blood and its components along with all types of contraceptives have been listed under the slab of nil rate post-GST.
5% GST rate: Mostly the pharma drugs have been under this slab. They are as follows:
12% GST rate: These products, medicines and pharma drugs which have not been specified anywhere is mostly subjected to 12 percent.
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The pharma industry is known to provide medicines, pharma drugs, and products for a wide range of therapeutic and non-therapeutic areas. The industry contributes 5 percent to the country’s GDP. The industry is growing faster than ever with a rapid growth of 15 percent attaining the Pharma Vision 2020 goal. By the end of this year 2017, the size of the industry is said to be USD 150 billion. The change in indirect taxation system through GST has to lead to a change of effects which is hoped to be positive for all companies in this industry.