Pharmexcil Calls for GST Rate Alignment in Pharma Industry

Pharmexcil urges GST rate alignment for pharmaceuticals to simplify compliance and address the inverted duty structure. The current tax gap between active pharmaceutical ingredients and formulations hinders industry efficiency and increases costs. Proposed reforms aim to establish tax parity, benefiting the healthcare ecosystem and patients.

The Pharmaceutical Export Promotion Council of India (Pharmexcil) has made a compelling case for the alignment of Goods and Services Tax (GST) rates within the pharmaceutical industry. This strategic move aims to diminish complexity and boost compliance. Presently, formulations, or finished medicines, incur a GST of 12%, while active pharmaceutical ingredients (APIs) are taxed at 18%.

Bhavin Mehta, Vice Chairman of Pharmexcil, cautioned about the ramifications if formulations shift to a 5% tax bracket while APIs remain at 18%. Such a scenario would exacerbate the inverted duty structure, heightening the gap from 6% to 13%. Mehta argued that aligning the GST rates between APIs and formulations could eradicate this issue, either by setting both at 5% for greater affordability or at 12% for revenue maintenance.

Moreover, Mehta advocated for reforms catering to micro, small, and medium enterprises (MSMEs), such as a fast-track refund system with strict timelines and interim support measures. He also pointed out that hospitals and diagnostics, exempt from GST, cannot reclaim input taxes on consumables, inadvertently inflating patient costs. Addressing these discrepancies would render the healthcare system more efficient.

(With inputs from agencies.)