The Goods and Services Tax (GST) is one of the biggest updates to indirect taxes in India. This will benefit the Indian pharmaceutical industry in the long run as it aims to simplify the tax structure and improve operational efficiency. However, GST is welcome because it creates a level playing field for pharmaceutical companies and ultimately benefits consumers. Given the healthcare and pharmaceutical industries, the new GST regulations are expected to benefit consumers by making healthcare accessible in practice. The effect on drug prices will be neutral up to a 12% tax rate and in some cases also inflation.
The main concern is that the VAT rate must be kept at a competitive level so as not to increase the price of medicines and medicines. General goods taxes can also cause companies to empty their supply chains to save on taxes. This suggests that despite the initial issues with tariffs and tax compliance, GST will be a win-win for pharmaceutical companies and consumers in the long run.
Effects on drugs
While GST may not have a major impact on drugs, a 5% tax rate on life-saving drugs used to treat diseases such as malaria, HIV-AIDS, tuberculosis, and diabetes is expected to slightly increase the price of these drugs.
So far, these drugs are exempt from excise and import duties. However, some states charge 5% of these drugs, which are now included in the tax. According to the GST, it will be 12% for formulations and 18% for APIs (Active Pharmaceutical Ingredients) - the main drugs used for the manufacture of final pills and tablets.
The main disadvantage of the GST is that it is not yet clear whether the healthcare sector, as well as life-saving drugs and medical equipment, will remain tax-exempt even after prosecution.
