GST Jitters- Chemists not stocking Drugs, Abbott promises compensations

Mumbai: In the wake of the goods and services tax (GST) regime introduction with effect from July 1, 2017 chemists are reported to have stopped stocking medicines and drugs beyond one week in anticipation of any setbacks brought about by its implementation.

It is assumed that chemists are worried on account of the risk, that they could suffer losses on account of a possible mismatch between tax payouts and tax refunds under the GST regime. As a result, stockists have decided to maintain a minimum inventory at hand.

In some cases, Business Standard reports that stockists have even started returning their stock to pharmaceutical companies. Generally, chemists keep a stock of drugs which would last more than 30 days but now they are stocking up drugs for a week at a time.

It is hoped by some that Pharma sector will be exempt from GST in the draft documents of the taxation regime. But it is also likely that the pharmaceutical sector will attract 12 per cent GST from July. It is feared that the burden of new regime will fall on retail chemists because old stocks will have to be sold according to the new regime and the burden cannot be passed on to patient as MRPs are fixed.

Many in the pharmaceutical industry have indicated that the 12 per cent tax will not make a difference for manufacturers as it will offset all other taxes that they pay to the government.

Meanwhile, Abbott India has decided to reimburse its trade partners for losses that could arise due to changes in the tax rate due to implementation of the goods and service tax from July 1.

In a note to its trade partners on Wednesday, Abbott said in case the new tax structure and the input-claim process results in any loss to partner-stockists on the closing inventory on June 30 or the day preceding GST implementation, it will reimburse such value to the stockist.

“This will ensure that our partner-stockists do not suffer any loss resulting from tax structure changes on the inventory they hold,” Abbott said. The company also requested its distributors to maintain normal inventory and ensure adequate availability of drugs during transition phase.