The prices of essential drugs will rise by up to 2.29 percent when Goods and Services Tax (GST) regime will come into force from July 1.
The government has fixed GST rate of 12 per cent on most of the essential drugs as against the current tax incidence of around 9 per cent.
However, the GST rate of some life saving drugs such as insulin has been reduced from 12 per cent to 5 per cent. The National List of Essential Medicines includes the likes of Heparin, Warfarin, Diltiazem, Diazepam, Ibuprofen, Propranolol and Imatinib.
In case of medicines such as insulin, on which the GST rate has been revised downward to 5 per cent from 12 per cent proposed earlier, companies will be required to reduce the maximum retail price, clarified the drug price regulator National Pharmaceutical Pricing Authority (NPPA).
NPPA said in case of savings due to lower rate of tax, the benefit may be passed on to the consumers as per the anti-profiteering clause in the GST rules.
NPPA has already notified that the revised ceiling prices of scheduled drugs, where excise duty is levied on MRP, will be calculated by applying a factor of 0.95905 to the existing ceiling price. This will be exclusive of applicable GST rates.
On the other hand, those scheduled formulations which are exempted from excise duty, their existing notified ceiling price would also be the new ceiling price, exclusive of GST rates, (NPPA) added.
In the case of non-scheduled formulations, NPPA has said that companies would have no option but to absorb the net increase if prices go up beyond the permissible limit of 10 per cent of MRP due to increase in tax incidence on the GST implementation.
The regulator is confident that the pharma industry will adopt the new tax system without much trouble.
“I am confident that GST implementation will be by and large smooth and will not cause any major disruption in the availability of drugs in the country,” NPPA Chairman Bhupendra Singh told PTI.
(With inputs from PTI)