10% hike too little, we want more to offset GST impact, say pharma players

Also want 100% input tax credit against 40% in cases where dealers don't have receipts for stocks

The pharmaceutical industry has sought permission to increase prices of non-scheduled drugs by more than the stipulated 10 per cent in a year, as the tax rate on most drugs was raised to 12 per cent under the proposed GST regime from the current nine per cent.

In a meeting held by the Department of Pharmaceuticals with the drug industry, pharma representatives raised this issue.

As per the Drug Price Control Order (DPCO) 2013, pharmaceutical companies can increase the price of non-scheduled drugs by upto 10 per cent each year.

While 80 per cent of drugs have been put under the 12 per cent GST rate, essential drugs are in the 5 per cent bracket.

The industry also raised the issue of refunds on taxes paid on input, called input tax credit in technical jargon. The GST Council has decided that for stocks whose receipts are not available with dealers, only 40 per cent input tax credit will be given. However, the industry wanted 100 per cent refund.

An industry representative who attended the meeting told Business Standard, "We also raised the issue of input tax credit with the department. The input tax credit which is 40 per cent should be made 100 per cent."

The pharma representatives also stated that the department emphasised on adequate stock in the market. This cames at a time when there has been reduction in inventory from 40 days to 27 days at stockist level on an average, according to All India Organisation of Chemists and Druggists (AIOCD).

Representatives of top pharmaceutical companies said stockists are not willing to keep high levels of inventory, fearing they will have to send back their stock if relabelling is required. Meanwhile, pharmaceutical companies are even willing to compensate the stockists for the losses they are likely to make due to GST. It is estimated that the impact of GST will be felt in the coming two quarters.