Price of many essential Medicines can Increase with GST

Since the introduction of Goods and Services Tax from next month, the price of essential medicines may increase up to 2.29 percent. The government has fixed a 12 percent GST rate at the cost of most essential medicines. The current rate of tax on these drugs is about 9%. However, prices of select medicines such as insulin may also fall. In fact, the government has reduced the GST rate on it from the earlier rate of 12 per cent to 5 per cent. The National List of Essential Medicines includes heparin, warfarin, diltiazem, ibuprofen etc.

The Drug Price Regulator, the National Pharmaceutical Pricing Authority (NPPA) has already issued a notification. In this notification, he said that the assessment of prices of medicines determined by excise duty on MRP will be done after implementing the 0.955905 factor at the current maximum price. This will be the exception of the applicable GST rate. According to the NPPA, there will also be a new limit for Scheduled Formulas, exempt from excise duty, their current MRP and notified prices.

According to the NPPA, in case of non-scheduled formulations, if MRP goes beyond the 10-percent limit, then companies will have no choice but to tolerate net increase. However, regulators are confident that the pharma industry will be in a position to adopt new tax system without any major problems.

In the case of insulin-like drugs where the GST rate has been reduced from the proposed 12% to 5%, the companies will need to reduce the MRP. NPPA says that in case of lower tax rate, it can be leveraged to the Consumers under the Anti-profit clause.

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