Nutraceuticals and food supplements, which represent a Rs. 30,000-crore market, have been absent from categorisation under the goods and services tax (GST) that's set to be rolled out on July 1, according to people aware of the matter. That could mean they are levied the top GST rate of 28%, up from 18-22% now.
"Health products which have similar composition and usage would tend to be classified on a common basis as it's difficult for the tax authority to define whether the product is therapeutic, nutritional supplement, for curative purposes etc.," said MS Mani, senior director, Deloitte Haskins and Sells.
"In the absence of differential classification, based on specific parameters, there is risk of several products attracting GST at the higher rate."
Will that warm, soothing cup of Horlicks get overpriced after July 1? It could also happen to Red Bull, Gatorade, whey protein, Bournvita and vitamin D3 supplements for infants.
“Malt-based products like Bournvita, Horlicks, Complan, Boost and AmulPro and other similar products, which are consumed by children, have been placed at 28%. The GST Council should consider a lower rate for these items,” Confederation of All India Traders (CAIT) secretary general Praveen Khandelwal told HT on phone.
Pharma and healthcare industry associations, including the Confederation of Indian Industry, had approached the GST Council on May 30 for clarity on the rates for nutraceuticals and food supplements. "We expect clearness on the GST rate for nutraceuticals and food supplements, which they have missed out," said Sandeep Gupta, vice-chairman, nutraceutical committee (national), Indian Drug Manufacturers' Association (IDMA).
Large multinational and Indian companies such as Amway, Abbot, Danone, Herbalife, Pfizer, Sanofi, Sun Pharma, IPCA, GSK, DSM, Merck, Mankind Pharma, Nestle, Alkem and others are members of one or the other groups that approached the GST Council.
According to a 2012 order by the commissioner of trade and taxes (Delhi), Red Bull doesn't fall in the aerated drinks category. Likewise, vitamins in tablet, powder or liquid form are neither drugs nor food products. Manufacturers say a tax rate of either 5% or 12% should apply to most of these products under GST. "It may not be possible to categorise all these different brands as one product category. But they may get some clarity soon," said one of those cited above.
"Supplements are used for prevention of diseases by staying healthy. It's not a drug but it ensures a person remains healthy," said Ganesh Kamath, director, Vital Neutraceuticals. Manufacturers looking to avoid any trouble on the GST front may levy the maximum rate of 28% in the absence of any clarification, thus making products too costly for poorer women and children, hitting the government's anti-malnutrition targets, he said.