GST effect: Prices of major essential drugs to rise by up to 2.29%

Drug price regulator is confident that pharma industry would adopt tax system without much trouble

Prices of a majority of essential drugs will increase by up to 2.29 per cent when the Goods and Services Tax(GST) regime kicks in from July 1. The government has fixed GST rate of 12 per cent on most of the essential drugs as against the current tax incidence of around 9 per cent.

However, some select medicines such as insulin will see a reduction in prices with the government revising GST rate downwards to 5 per cent from 12 per cent proposed earlier. The National List of Essential Medicines includes the likes of Heparin, Warfarin, Diltiazem, Diazepam, Ibuprofen, Propranolol and Imatinib.

Drug price regulator National Pharmaceutical Pricing Authority(NPPA) has already notified that the revised ceiling prices of scheduled drugs, where excise duty is levied on Maximum Retail Price (MRP), will be calculated by applying a factor of 0.95905 to the existing ceiling price. This will be exclusive of applicable GST rates.

On the other hand, those scheduled formulations which are exempted from excise duty, their existing notified ceiling price would also be the new ceiling price, exclusive of GST rates, NPPA added. In the case of non-scheduled formulations, NPPA has said that companies would have no option but to absorb the net increase if prices go up beyond the permissible limit of 10 per cent of MRP due to increase in tax incidence on the GST implementation.

The regulator is, however, confident that the pharma industry would be in a position to adopt the new tax system without much teething troubles.

"I am confident that GST implementation will be by and large smooth and will not cause any major disruption in the availability of drugs in the country," NPPA Chairman Bhupendra Singh told PTI.

In case of those medicines such as insulin, on which the GST rate has been revised downward to 5 per cent from 12 per cent proposed earlier, companies will be required to reduce the MRP.

NPPA said in case of savings due to a lower rate of tax, the benefit may be passed on to the consumers as per the anti-profiteering clause in the GST rules.