Impact of GST on Pharmaceuticals

The Goods and Service Tax Bill was finally cleared by the parliament. It has come into effect since July 2017. GST is expected to make taxation easier. It will also reduce the number of corrupt practices. It is expected to reduce the confusion that people have about the tax system in our country. Let us check out the impact of GST on the pharma sector

Effect of the new tax system on pharmaceuticals:

This new tax system is going to affect the pharma industry in a big way. It will have a good impact on the supply chain management. The manufacturing costs will come down. The profit of the manufacturers will obviously increase. The GST bill is a reliable one as it has been discussed in detail for past two years. The corporate world is very much keen to understand the impact of this bill on the different industries.

The tax burdens at State and Central level will get reduced:

The central level taxes like excise duties, service tax, excise duties under the medicinal and toilet preparations Act 1955 will be removed by this new system. Surcharges will also get removed. Different State level taxes will be merged under this tax. This will include CST, VT, sales tax, entertainment tax, luxury tax etc.

Understanding the tax law on pharmaceutical products:

One the formulations the VAT rate is 9%. On the pharma products the VAT rate is 5%. The excise duty is 12.5%. The government gives excise free manufacturing zones to these products. This is beneficial to the small manufacturers who are located in remote areas. The manufacturers in this zone have to pay an excise of just 1.5%. The VAT is normally charged on the MRP that is maximum retail price. The charges are implied at a single point. As a result no taxes have to be filed by the distribution channel. The GST on pharmaceuticals is going to ease down many things.

It is not just the pharma industry, but the entire business world is going to get affected by the Goods and Service Tax. What the business community and the common man need to understand is that this is a very good thing for the entire country. One country, one tax will surely help in reducing the taxation complications and the burdens associated with it. It is also a major step that the government has taken to curb corruption in the country. It is a step which will make the common man feel more confident. The entire country will reap the benefits of this tax. In the long run pharmaceutical manufacturers will realize that their profits have increased and the taxation is become lot simpler.

This is the just the beginning of a big revolution in the country. This bill has been discussed a lot of different levels of the government. Different amendments and changes were made and only then the new tax has been introduced by the government. This is a positive step which is going to help in the progress of not just businesses but of the entire country.