The impact of GST on Pharma industry – GST has brought a storm in the nation since the news has been out. A lot of the sectors and companies will be under the impact of GST and Pharma and Healthcare industry is no exception. These two industries are one of the leading contributors with respect to revenue and employment and therefore revenues from the taxes. Here, we will discuss the impact of Goods and services tax on the Pharma industry.
There is no denying the fact that India is one of the largest producers of the generic medicines in the country. The Pharmaceutical industry is currently 3rd largest in terms of volume and 14th in terms of value. The population is growing which is the major reason that we need better healthcare services in our country.
What is GST?
GST stands for Goods, Services, and tax. It is basically an indirect tax throughout the nation to replace the taxes that are levied by the central and the state governments. This tax was introduced as the constitution hundred and twenty-second amendment act 2017. It is governed by the GST council and the chairman of the union finance minister of India.
How will GST affect the Pharmaceutical and Healthcare Industry of India?
The passing of the GST bill has grabbed a lot of attention across the country because of the obvious reasons. Most of the industries and various sectors are to be benefited from this change because it will make the taxation process easier than before. It will replace a number of taxes and duties and form a single uniform tax in all the states of India.
The healthcare industry of India is one of the most growing and influential sectors with respect to revenue and employment. More will be the expenditure on the healthcare; more will be the revenues on the taxes. With the implementation of the GST, various taxes of the tax system will form into a single uniform tax.
What will be the benefits of GST to the healthcare and pharma companies?
Now, you might be wondering how GST can benefit the pharma industry. Well, that depends on the size of your company and the products you manufacture. The government has different percentages of GST that would implement on various sectors in the pharma industry alone. It would be providing several benefits too and they are mentioned below in the list.
- It would help the industries by improving the taxation structure since 8 different types of taxes are imposed on the Pharmaceutical Industry. These 8 taxes would probably form into a single tax.
- Implementation of GST will definitely ease the way of doing business in the nation, as well as it will also help in minimizing the cascading effects of manifold taxes that is applied to one specific product.
- Also, GST would also improve the operational efficiency by rationalizing the supply chain that could alone add 2 percent to the nation’s Pharmaceutical industry.
- The biggest advantage for the Pharma companies would be the reduction in the overall transaction costs with the withdrawal of CST (Central Sales Tax). GST is also expected to lower the manufacturing cost.
What would be the possible changes after the implementation of GST?
The life-saving drugs, healthcare services, and medical devices would probably continue to be tax-free after the GST comes into play. Some of the state governments used to impose taxes but it might change after the implementation of the GST. It is still unknown that how GST would influence the bonus schemes, free drug samples and the inter-state movement of the expired products or the stock transfers. But overall GST is a win- win situation for the Pharma industries.
So, if you were looking for the information regarding the effects of GST on the pharma industry then I hope this might have been helpful for you. GST has a constructive effect on the Pharma and healthcare industry. The rest would be clear once the GST will come into practice.