Pharma industry hopes for relief from GST reforms 

Pharma industry is optimistic that its concerns, especially the inverted duty structure, will be addressed by the forthcoming Goods and Services Tax (GST) reforms, Dr. Reddy’s Laboratories Chairman Satish Reddy said.

“For an extended period, the pharmaceutical sector has faced structural challenges, including higher GST rates and an inverted duty structure, which have impacted the cost efficiency of domestic manufacturing and affordability of medicines. We are optimistic the reforms will address these critical concerns…” he said on Tuesday.

Welcoming Prime Minister Narendra Modi’s recent announcement on next-generation GST reforms, he said besides the concerns finding resolution, the industry is also hopeful of the reforms paving way for introduction of a rationalised, industry-friendly tax framework.

“Such measures will significantly improve the affordability and accessibility of essential medicines for every citizen, while also enhancing the global competitiveness and innovation capacity of the Indian pharmaceutical industry, Mr. Reddy said in a statement days ahead of GST Council meeting that is expected to discuss the reforms.

Reaffirming pharma industry’s committent to working in partnership with the government to ensure the reforms translate into tangible benefits for patients and the broader healthcare ecosystem, he said amid an “increasingly complex and uncertain geopolitical environment, these steps will not only reinforce India’s healthcare security but also strengthen the country’s role as a trusted partner in global health supply chains.”

The pharma industry leader’s statement is reflective of the expectations building up in the industry. On Monday, Pharmaceuticals Export Promotion Council of India vice chairman Bhavin Mehta appealed for aligning of GST on active pharmaceutical ingredients (APIs) and formulations. Formulations attract a GST of 12%, while APIs are levied at the rate of 18%. Under the two-rate structure on the cards, if formulations move into the 5% slab and APIs remain at 18%, the inverted duty structure will widen from existing 6% to 13% thus resulting in more working capital getting locked, refund backlogs and add costs to an industry that operates on thin margins, he said.