Impact of GST on Healthcare and Pharma Sector

After the implementation of GST which is scheduled to happen on 1st July 2017, all the leading business including FMCG, pharma, healthcare, textile, banking, education, power, telecom, media, insurance etc. are expected to be affected. However, the government is quite positive about its impact on the Indian economy and states quite clearly in latest GST news coming in, that after a few initial hiccups and hassles, GST is going to be a boon for all the trades and businesses.

India holds an important position in the global pharma sector. By the end of the year 2020, the Indian pharma market is expected to grow by 15% as compared to the global pharma market growth of 5%. This means that India stands a chance to become the world’s third largest pharmaceutical market globally growth wise and sixth largest market size wise. Looking at the data, the healthcare and the pharma industry of the country is growing leaps and bounds and contributing well to the India’s GDP. The incessant effort of government to receive more FDI has also been on the cards.

Now everyone in the healthcare sector is keeping track of GST news to understand how will GST effect and change the already booming Pharma sector in the country? Will this kind of growth go for a toss or will it make the growth of the pharma industry even more spectacular?

Impact of GST on Healthcare and Pharma Sector

What we have understood about GST till date is that it is going to benefit all the sectors of Indian trade with a simpler and unified taxation system. And the same is expected for the pharma and healthcare sector where it is believed, as per the latest GST news, that GST is going to have a positive impact on the pharma and healthcare of the country.

Currently the pharma industry pays around eight types of taxes which is a complicated way of doing business. With the roll out of GST, one uniform tax will make things easier. It will also reduce the cascading effects of different taxes. Like in other sectors, in pharma as well, GST will enhance the working efficiency by making the entire supply chain rational. Post the GST application, according to the latest GST news, a seamless flow of tax credit and better compliance is expected. The pharma companies will experience the lower transaction costs as compared to the current tax regime as under GST, the Central Sales Tax or CST will be subsumed. GST news also seems to point out the trend that the manufacturing cost of products may come down.

Under the current scenario, the country imports many healthcare machineries and technology at a high cost, as the duty which is charged on the healthcare machinery is not treated as a tax credit. But according to the GST news, after the implementation of GST regime, the duty charged on the import of any medical equipment or technology might be treated as a credit.

GST is also going to benefit the end consumer as the GST laws will make healthcare cheaper. However, the clarification is yet to come on the important life-saving drugs or API’s (Active Pharmaceutical ingredients) which are currently tax free. However, the latest GST news says that it will remain tax-free. The same uncertainty goes for free sample of medicines, schemes, interstate inventory movement etc.

Talking about the medical tourism, in the last year the medical tourism has witnessed a revenue growth of more than 600%. Latest GST news seems to suggest that after the GST roll out, medical tourism will witness even more growth since under the GST regime, the cost of insurance, medicines, and international travel is going to reduce.

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