Drug price hike linked to GST rate

EY's Hitesh Sharma says life-saving drugs should be kept out of the GST, else patients will lose out

The pharma industry has mixed feelings about the goods and services tax. Industry executives and analysts believe that if the rate is upto 12 per cent, it shouldn't affect the healthcare and pharmaceutical sector.

Wockhardt's Habib Khorakiwala in a conference call on Thursday said the supply chain will benefit with the elimination of multiple taxation. He feels that if the rate is at 12 per cent, drug prices are likely to only go up marginally.

However, if the taxation structure for essential drugs changes with the GST regime, prices of drugs could increase significantly.

An official at Department of Pharma said if the sector is touched by the GST, the purpose of the National Pharmaceutical Pricing Authority (NPPA) will become redundant. He told Business Standard that if drugs are brought under the GST regime, NPPA will not be able to function. "NPPA is trying to bring the prices down and is succeeding in its endeavour. If these drugs come under GST regime, NPPA's efforts will be in vain."

 

EY's Hitesh Sharma's observation is that the removal of the 1% origin tax on interstate supplies is the key amendment in the bill. He says, "This has addressed the concern of cascading effect of GST which could have flawed the very construct of GST." He further believes that life-saving drugs should be kept out of the GST, else patients will lose out.

Industry would also be looking forward to a beneficial tax treatment for goods manufactured in tax free zones, a simpler valuation mechanism for levy of GST on stock transfer and zero rating in case of free supplies such as physician samples etc.