Drug sales subdued in July over lingering GST issues

Pharmaceuticals are still confused over tax rates of certain products

Pharmaceutical sales are yet to pick up three weeks after the implementation of the goods and services tax (GST) due to the lingering effects of software updation, delays in registration and confusion over tax rates of certain products.

Distributors held 22-day inventory on July 21, which was five days higher than June-end stock but 18 days lower than May-end level, according to the All India Organisation of Chemists and Druggists (AIOCD).

"There has been a slow and gradual build-up of inventory days," said Ameesh Masurekar, director of AIOCD-AWACS. The primary sales had been impacted due to issues related with GST Network registration,  software updation at stockist level and confusion on tax rates on certain products.  Considering this trend, the primary sales loss of June may only be partially recovered in July and the recovery may go on till September or beyond, he added.

Industry sources point out that companies are offering incentives to distributors to encourage them to advance their purchases. Another reason for lower offtake is increased costs for distributors. "Earlier, we paid value-added tax every quarter,  but now, we have to pay the GST every month, which will increase our cost," a stockist remarked.

Pharma companies are seeing the impact of lower offtake with a sharp reduction in sales in the first quarter of this financial year (FY18). Glaxo Smithkline Pharmaceuticals saw sales decline by 14 per cent, while Alembic sales were down 12 per cent.