Brunt of GST to be felt for two quarters: GSK India MD

With the roll-out of goods and services tax (GST) around the corner, drugmakers are gearing up to make the most of the new regime. While they say they are absolutely ready for the new regime, near-term impact is what is worrying them. Speaking to Business Standard, Annaswamy Vaideesh, managing director of GlaxoSmithKline’s (GSK) India business, says that GST will benefit in the medium to long term.

When asked about worries of de-stocking, he said that the company is working with stockists to ensure they do not incur losses due to tax changes at the same time making sure there is no shortage of GSK’s drugs in the market. “We will compensate stockists for any loss they incur due to GST. We have made provisions for it. The effect of this will be bare minimum on our earnings for the coming quarter.”

This comes after Abbott had earlier stated that it will reimburse trade partners for losses that could rise due to changes in the tax rate with GST implementation.

Vaideesh added that the impact would be 1.5 per cent of the company’s revenue and this will be for around two quarters.

According to a Pfizer official, demand for their drugs from stockists has come down. “Stockists want to hold less stock. Demand has come down considerably. They want to hold less stock as they want to minimise call-back of drugs for the sake of re-labelling,” he pointed out.

Meanwhile, these companies along with their associations are in talks with the government on the GST rates that have been set for pharmaceutical products. Vaideesh said 80 per cent of the drugs fall in the 12 per cent bracket; only the rest has five per cent tax.

Meanwhile, the National Pharmaceutical Pricing Authority held a meeting with stakeholders on ensuring uninterrupted supply of drugs across the country. Indian pharmaceutical industry had made representations to the government on allowing revision of prices of drugs, especially for non-scheduled formulations. Prices of non-scheduled formulations can be increased each year by maximum 10 per cent. The industry’s representation has been to allow it to increase the price of drugs by more than 10 per cent.