Pharma, medtech bodies seek transition time and simpler refunds

Industry bodies asked the govt for a three-month transition period, use of old packaging, and a simpler GST refund mechanism to avoid supply chain disruptions in healthcare

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With the new GST regime coming into effect in just 10 days, pharmaceutical and medical technology device (medtech) industry bodies have urged the government to ensure a smooth transition in the critical healthcare services to prevent supply chain disruptions.

 

According to sources, recommendations by the medtech industry to the Central Board of Indirect Taxes and Customs (CBIC) include steps like allowing a transition period of three months and sale and use of existing pre-printed packaging and stock with old MRPs without requiring relabelling.

 

“Since it is not feasible to apply stickers to billions of low-priced disposable medical devices, manufacturers could post revised, lower maximum retail price (MRP) rates on their websites and issue circulars to dealers and trade channel partners,” people in the know said.

 

Retailers could then be requested to sell products at the reduced MRP based on the new GST rate.

 

While the medtech players thanked the government for reducing the GST on medical devices to 5 per cent, they asked for simplification of the GST refund mechanism for accumulated input tax credit. 

 

An industry executive said that a streamlined and time-bound refund system for accumulated GST credits, along with refunds on GST paid for services and capital expenditure investments should be implemented to ease cash flow issues faced by domestic firms so that prices may be reduced.

 

“The aim of GST is to tax value addition at each stage of the supply chain, not to burden suppliers with working capital stress or hinder their global competitiveness,” industry bodies added.

 

This comes even as several pharma associations have asked for a clear mechanism for adjustment of GST input within six months to prevent losses to small pharmacies.

 

“While the reduction in GST on medicines from 12 per cent to 5 per cent is a welcome step for patients, it has created heavy accumulation of GST inputs and unsold higher cost stock with pharmacies, causing immediate financial stress,” Sandeep Nangia, president of the Retail Distribution Chemist Alliance, said in a letter dated September 6 to Delhi Chief Minister Rekha Gupta.   

 

The medtech industry has also reportedly asked for an increase in health cess on imported medical devices from current 5 per cent to 10 per cent.

 

“This will partially level the field with low-cost international products, where Indian companies have been losing market share, and proceeds from this cess can be ring- fenced to finance Ayushman Bharat and other public healthcare programs, ensuring a socially beneficial reinvestment,” a person in the know said.