The goods and services tax (GST) is unlikely to be a very bitter pill for the pharmaceutical industry, which feared a substantial rise in drug prices under the new indirect tax regime. While around 80 per cent drugs were put in the 12 per cent GST
bracket (up from the current 9 per cent slab), implying a sharp rise in prices, the National Pharmaceutical Pricing Authority (NPPA) has stepped in to keep medicines affordable after the GST
roll-out on July 1.
The pharma pricing regulator has notified the revised ceiling prices of 761 drugs which are part of the Schedule 1 of the Drug Price Control Order (DPCO) 2013. According to the revised list issued by the NPPA, prices of most drugs have come down.
With this regulatory move, the price increase after the GST
roll-out would be marginal as the base price has been lowered. Even as price revision is a continuous process, the latest order may serve to cool the nerves of the pharma industry trying to grapple with the new taxation system.
Indian Drug Manufacturers Association (IDMA) President, Deepanth Roychowdhury, however, said, “Ceiling prices of scheduled formulations have come down and are on expected lines.”
The NPPA notification of prices has not included the GST element. The list has deducted the excise duty element and VAT from the existing ceiling price of the drugs. In the case of scheduled drugs where companies have been exempted from paying the excise duty, the NPPA has not revised the ceiling price. Companies believe that while the ceiling price has come down for these drugs, adding the GST element to the new ceiling price will make medicines slightly more expensive than their current rates.
Under the GST regime, the prices of stents have not been increased. The NPPA has kept the prices of drug eluting stents at Rs 30,800 and bare metal stents at Rs 7,400. Just like stents, prices of immunosuppressants like cyclosporine and drugs to treat leukaemia remain unchanged. Prices of Erythropoietin, Filgrastim and hepatitis B vaccine also remain the same.
Industry is however worried about the nicotine gum being placed in the 18 per cent bracket. Nicotex nicotine gum marketed by Cipla falls in this category. While Cipla sought a revision in the GST slab for nicotine gum, the government hasn’t moved on that yet.
While most of the drugs will fall under the 12 per cent GST bracket, certain life-saving drugs are in the 5 per cent tax slab under the new regime. Analysts have maintained that the impact of GST will not be drastic on such drugs. But the industry is worried about input credit which is only 40 per cent for those without receipts.