GST on expired and damaged stocks costs pharma Rs 500 crore a year

Why should there be the Goods and Services Tax (GST) on materials that cannot be sold? That is the question, the Indian pharmaceutical industry, is hoping will get addressed in the final tweaking of the GST provisions.

A representation to this effect has been made by the Indian Pharmaceutical Alliance (IPA), which has some of the leading Indian pharmaceutical companies as its members.

"We have written to the GST council that a way out needs to be found on this and ideally, GST should be exempted on date-expired and damaged stocks, which are returned by the retail chemist to the pharmaceutical companies," says D G Shah, director-general of the IPA.

At the moment, such stocks also attract GST.

The argument being that GST must be imposed on product sales and on their consumption but that may not be applicable in cases, where medicines overshoot their expiry date or are damaged. This is a major issue, he says, since, under the current provisions, there is GST imposed on these too and this means, based on current estimates, it costs about Rs 500 crore per annum for the industry.

"It is therefore a serious issue as it is an additional burden for the industry and needs to be looked at by the government," he says. Today, a chemist, when he returns such stock to companies, he needs to raise and invoice and charge GST on it.