GST (Goods & Services Tax) is expected to be implemented in April 2017 on priority by current central government. Indian Pharma Industry is already under pressure because of rising costs & successive DPCOs. The complex local and central regulatory structures are adding to inefficiencies of IPM as a sector in Indian Economy.
Pharma Industry furnishes logistics for transportation from manufacturing units to warehouses & from these warehoused to distributers/retail outlets & directly dependent upon C&F (carry & forwarding) models for distribution. The domestic Industry is waiting for GST & its cascading benefits for the manufactures with an expectation that it would rationalize the tax structure and optimize distribution expenses at both the ends:
- Manufacturing costs by reducing the cost of raw material transportation
- Distribution costs by reducing the cost of finished goods transportation
Multistage taxation in the domestic industry like:
- Custom duty on imports
- Central excise duty on manufacture
- Central Sales Tax (CST) / Value Added Tax (VAT) on sale of goods
- Service tax (entry tax, octroi, cess) by the State
adds cost to the costs & increase inefficiencies. GST is conceptualized to replace these indirect taxes.
Therefore, inter-state transactions would become tax neutral, making India one single common market no longer divided by state borders. This will result in lower cost which can add to bottom lines or can be passed on to customers.
It’s obvious that the traditional C&F models will be replaced by supply chain efficiency models and the players who would transform early will always get the early adapter benefits.
On the other hand, IPM enjoys the tax exemptions in some of the states like HP & Uttarakhand which will be laid off post GST continuance. Now it’s the matter of time, how the industry is going to transform in the new taxation regime.
Let’s hope for a great tax system which would help the Indian society & economy as a whole 🙂 🙂