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Reactions to GST

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Industry experts give their viewpoint on key taxation reform bill GST

“For health-tech startups, GST will bring in much needed rationalisation of indirect taxes as it will create homogeneity towards levy of state taxes and claim of input tax will be much more seamless. Currently, GST is a major laggard when it comes to inter-state transfer as it doesn’t offer any input tax to the trader and hence makes it unviable to buy from different states”

Aditya Kandoi, Co-Founder, CareOnGo

“GST is one of the most awaited reform measures by the industry. It is heartening to see that there is consensus emerging in passage of crucial GST bill. It is noteworthy that the principal opposition party has played a constructive role by articulating some of the concerns which have been noted by the government and would help form base of a robust GST framework for India”

Harshavardhan Neotia, President, FICCI

Supply chain consolidation will help optimise cost: Most pharma companies today operate through C&F and depot mechanism in most states. GST will enable pharma companies to rationalise their distribution networks through consolidation of depots/warehouses and better inventory management.

Increase in tax rates may have limited adverse impact: The effective tax rate for pharma companies is currently 12-14 per cent (primarily comprising six per cent excise and four to five per cent VAT and two per cent CST). Levy of GST for most pharma products will be at concessional rates of ~12 per cent. Pharma companies will have the pricing power to pass on the burden of additional taxes to consumers.

Removal of area-based exemptions may have adverse impact in long term: Most pharma companies currently enjoy area-based exemptions on indirect taxation. While the existing area-based exemptions are likely to be grandfathered and may not have an impact in the near term, the future non-availability of such exemption may have a slight adverse impact on the sector.

Motilal Oswal Securities

EP News BureauMumbai

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