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The Indian Drug Manufacturers' Association (IDMA) has urged Prime Minister Narendra Modi to consider its suggestions specific to pharmaceutical industries in the proposed GST law. The association has requested the Prime Minister that life saving drugs should be exempted from GST; physician's sample should be out of the purview of GST and GST should be applied at zero rate for all supplies to and from R & D facilities that are recognised by DSIR (Department of Scientific and Industrial Research).
The association has recently submitted its suggestions to the Prime Minister and has requested that the incidence of tax should be kept lower than merit rates in order to benefit the patients, and pharma goods including medical equipment and active pharmaceutical ingredients should be categoried as essential goods. The higher tax incidence, apart from burdening the patients would adversely affect the competitiveness of the industry.
At present excise duty is levied on pharma goods at the rate of 6 per cent on MRP less abatement and VAT is levied at the rate of 5 per cent in most of the states.
The association has further recommended that the government should reconsider and keep the physician's samples out of purview of GST as it would create a lot of complications on compliance. Any form of direct or indirect GST on free supplies could have a significant impact on the sales and promotional spend of pharma companies specifically those introducing novel therapies, new drugs and NDDS as medical professionals invariably use these free samples to distribute, to gain firsthand experience on the performance of the drug and also as starter does for poor patients, who otherwise, may not purchase these medicines even after being prescribed.
As per section 3 of the draft GST law, free supplies in the course of business either to another registered or unregistered dealer or to an individual shall be taxable. Hence free samples given as physician's samples for promotion could attract GST.
The association has also recommended that the GST should be applied at nil rate for all supplies to and from R & D facilities that are recognised by DSIR, which would otherwise result as a cost to such pharma units leading to increase in prices of medicines. There is no specific provision for exemption from taxes for the purpose of R & D under GST regime.
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