The government on Friday warned pharmaceutical companies to comply with the anti-profiteering clause in the Goods and Services Tax rules and pass on to consumers any benefit arising out of lower tax rates under the indirect tax regime.
The notification by the Department of Pharmaceuticals also says that, for scheduled drug formulations on which excise duty is levied on the maximum retail price, the revised price ceiling exclusive of GST would be 95% of the current price ceiling.
“In case of savings due to lower rate of tax, the benefit may be passed on to the consumers as per the anti-profiteering clause in GST rules,” the notification said.
“In case of scheduled formulations, where presently excise duty is levied on MRP, the revised ceiling price exclusive of applicable GST rates would be calculated by applying a factor of 0.95905 to the existing notified ceiling price,” the notification added.
The government also specified the price rules for non-scheduled drugs under the GST regime, saying that pharmaceutical companies would have to absorb any burden that may arise from higher taxes which would increase the price of the drug more than the permissible 10% increase over their levels in the previous 12 months.
“In case of non-scheduled formulations … DPCO 2023 needs to be followed irrespective of any change in the tax structure or tax rates,” the notification said. “The companies will have no option but to absorb the net increase, if any, in the incidence of tax on implementation of GST within the permissible limit of 10% for increase of maximum retail price compared to the MRP of preceding 12 months.”
“Under the present system, medicines not under price control are allowed an annual 10% price increase in line with WPI (Wholesale Price Index),” TR Gopalakrishnan, Deputy Secretary General of the Indian Drug Manufacturers’ Association (IDMA) said. “This has been a standard practice to allow the industry a marginal increase every year to adjust for inflation.”
“Now since we have GST, we have requested the Department of Pharmaceuticals and NPPA (National Pharmaceutical Pricing Authority) for a one-time allowance this year,” Mr Gopalakrishnan added. “They need to consider the implications as even the DPCO (Drug Price Control Order) will have to be amended. We have a meeting next week with the NPPA regarding this.”
