The country could be staring at an acute shortage of medicines in the second half of June if the government or manufacturers don't look into potential losses faced by pharmacists from GST's rollout on July 1.
They are worried that they could suffer losses on account of a possible mismatch between tax pay outs and tax refunds under the GST regime. Stockists have decided to maintain a minimum inventory at hand. In fact, they have even started returning their stock to pharmaceutical companies. Chemists have begun cutting back on the quantity stocked. From stocking drugs for about 30 to 40 days, they are now stocking up for a week at a time.
Sales of drugs will be two-three times higher from June onward due to onset of monsoon bringing in seasonal diseases. Chemists, however, insist that patients will not be affected by the transition. “Stocking beyond a week will not be possible, but drugs will be available for patients. We can also dispense branded substitutes of other companies in case of shortage,” said Hakim Kapasi, member, All India Association of Chemists and Druggists.
“The burden of new regime will fall on retail chemists. Old stocks will have to be sold according to the new regime. The burden cannot be passed on to patient as MRPs are fixed. So, we are stocking for fewer days, until we are sure of the situation,” said Anil Navandar, Secretary, Maharashtra State Druggists and Chemists Association.
The pharmaceutical industry feels that they can take on the new tax regime with ease. “The 12 per cent tax will not make a difference for manufacturers as it will offset all other taxes we pay to the government. It is also not likely that patients will have to face drug price hikes after GST. But the government should take a call on hiccups faced by retailers on how to return to them the difference they will foot, as patients do not pay extra,” said a senior manager from Lupin Limited.
JS Shinde, president of All India Organisation of Chemists and Druggists (AIOCD), told that government has assured 100% refund of VAT and 40% refund of excise as Input tax credit. So in effect, the pharmaceutical companies may have a loss of 3.6%. For instance, if they are holding a stock of Rs.1 lakh, they would be incurring a loss of Rs 3600 on medicines supplies.
At present, wholesalers and retailers pay six per cent value added tax (VAT) and an additional excise duty on medicines. Prices are adjusted by manufacturers who account for earning of wholesalers and retailers. Some do not levy excise duty, as they manufacture out of excise-free zones like Baddi in Himachal Pradesh or Sikkim.