Chemists Association Calls for Uniform 7% GST on Medicines

Speedy Summary

• The Bangalore District Chemists and Druggists Association (BDCDA) has submitted a proposal to Union Finance Minister Nirmala Sitharaman, seeking uniform GST reforms in the pharmaceutical sector.
• BDCDA suggests implementing a 7% GST directly on maximum Retail Price (MRP) of medicines, rather than on discounted transaction values.
• Key rationale behind the proposed reform:

– Current GST system leads to artificial discounts, potentially up to 80-90%, misleading consumers and reducing tax revenue for the government.- Uniform MRP-based GST could eliminate price manipulation and restore ethical trade practices while simplifying compliance processes.

• Medicines such as life-saving drugs, antibiotics, injectable medicines, anti-cancer drugs, and surgical products/syringes are currently outside Drug Price Control Order regulations. This allows inflated MRPs (often marking up prices by 400-599%), with fake discounts hiding profiteering while impacting patients and reducing GST collections.
• Generics noted for excessive profit margins (>1000%) are often sold under misleading price schemes. Levying GST directly on MRP would enforce transparency in pricing for such medications.
• Current system divides medicine categories into multiple slabs:

– 0% slab covers ~4% of medicines
– 5% slab includes ~9%
– 12% slab,which constitutes ~82%
– 18% slab,comprising ~5%.

• BDCDA advocates abolishing thes slabs altogether in favor of a universal rate of 7% GST applied uniformly across all medicine categories based on printed MRP.

Indian Opinion Analysis

BDCDA’s call for rationalizing GST practices reflects underlying challenges within India’s pharmaceutical industry stemming from issues like artificial discounting mechanisms and inflated mrps. If implemented, the proposed shift to uniform MRP-based taxation could create greater transparency by removing incentives for falsified pricing-a step that may benefit both consumers struggling with affordability issues and government authorities combating tax losses.

Though, transitioning to an entirely new framework requires careful evaluation of its economic viability and implications across various stakeholders such as manufacturers concentrating on generics or smaller distributors competing within existing margins. simplifying healthcare taxation through standardized measures might foster accountability but must address unintended consequences like increased overheads or shifts in availability patterns among essential medications. Policymakers will need holistic consultations before restructuring this complex ecosystem comprehensively.

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