Pharma traders seek IT rule exemption as retailers pay stockists in cash

They fear scrutiny by tax authorities at a later date, assure that the relaxation will not be misused

Pharma traders have urged the government to relax the Income Tax provisions on cash payments, stating that their collection cycles have been adversely impacted during the lockdown period. Retailers are not able to get cheque books from banks and banks are reluctant to handle cash deposits made by retail members. As a result, retailers are now paying larger amounts to the stockists in cash, which the latter are afraid would create a problem in the longer term.

Under normal circumstances, stockists supply medicines to retailers in a particular area and send a salesman to collect cheques or cash from them periodically. In the current lockdown scenario, however, the movement of salesmen has been restricted and the stockists are just about managing supplies to retailers with the help of smal; third-party transporters. 

Apart from the challenges in getting cheque books from the banks, or getting them to accept cash deposits, small retailers are also facing connectivity issues for transacting inline, the All India Organisation of Chemists and Druggists (AIOCD) said. Most of the retailers have started depositing cash to stockists over and above the defined limit set under IT Act, 1961. Since medicines are listed as essential commodities, stockists are maintaining supply to retailers.

"Under the present tax laws, we cannot make payments beyond Rs 20,000 in cash -- we need to accept cheques only. But retailers ainsist on paying in cash due to the current situation. We are concerned about what could happen after two three years during Income Tax Assessment. A lot , since things would have changed by then and we could be asked why we accepted large amounts in cash," said Rajiv Singhal, general secretary of AIOCD. The organisation has sent a letter to the Prime Minister Narendra Modi seeking relaxation in the relevant provisions in the IT Act, till June 30, or till such time as things become normal again.

"Pharmaceutical Stockists are registered under the GST Act and supply goods to retailers on GST invoices only," AIOCD said, asserting that the relaxation sought would no be misused if granted. Such a measure is important to ensure uninterrupted supply of medicines and timely payment to pharmaceutical companies during this crucial period, it added. 

The organisation has earlier sought the government's intervention in ensuring the supply of essential medicines across the country by addressing the supply chain issues. The government has extended support in this respect and the supply of medicines across the country is going on smoothly at present, said Singhal.