The Indian pharmaceutical industry, a global leader in generics and vaccines, might be breathing a sigh of relief soon.
According to reliable sources confirmed by ET NOW, the Goods and Services Tax ( GST ) Council is considering addressing a long-standing issue plaguing the sector – the inverted duty structure on pharma companies.
This structure refers to a situation where the tax rate on raw materials (inputs) is higher than the tax rate on the finished product. In the case of pharmaceuticals, several medications face an 18% GST on ingredients, while the final product carries a 5% tax.
This disparity creates a financial burden for manufacturers, hindering their ability to offer competitive prices.
Recognizing this challenge, the Union Ministry of Chemicals and Fertilizers is reportedly taking action. Following consultations with industry representatives, the department of pharmaceuticals is expected to approach the Finance Ministry with a proposed solution. Industry suggestions reportedly include setting a more balanced GST structure, with a potential 12% rate for final products and a 5% rate for inputs.
This development aligns with the government’s broader vision for the pharmaceutical sector. “Vision Pharma 2047,” a national initiative, aims to position India as a global leader in affordable and innovative medicines. India’s healthcare and pharmaceutical leaders are aiming for disruptive innovation by 2047. The Indian pharmaceutical industry is expected to reach $450 billion by 2047, up from $40 billion in 2021 and an expected $130 billion in 2030. Addressing the inverted duty structure would directly contribute to this goal by making production more cost-effective and fostering a more competitive environment.
However, to maintain this momentum, the industry requires a supportive regulatory framework. A more streamlined GST structure would not only ease financial constraints but also incentivize further investment and innovation.
This potential change aligns with another recent trend – the government’s focus on strengthening the domestic medical devices market. With the “Production Linked Incentive (PLI)” scheme, the government aims to boost local manufacturing of medical equipment. A more efficient pharma sector, freed from the burden of the inverted duty structure, can further bolster the healthcare ecosystem as a whole.
However, it is important to note that the final decision regarding GST revisions lies with the GST Council after the formation of the new government. While industry recommendations are being considered, the exact timeline for implementation remains unclear.
Despite this caveat, the potential correction of the inverted duty structure signifies a positive step towards a more competitive Indian pharmaceutical sector.
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