Pharma sector yet to sync fully with GST

Bengaluru, Jul 2: There was much con fusion at chemists' shops across the city.

While many shops failed while issuing bills to customers, very few pharma outlets like Medplus (that has both online and phyical stores) outlet were able to issue bills with clear indicators on the GST added.

Smitha Murli, who bought her mother's regular medicine at a chemist's shop in Chamarajpet, south Bengaluru, had pay 12%GST to what medicines cost. "The store issued me a bill with clear indicator on how much was charged for state GST and Central GST. It's 6% each and to tally I paid 12% GST," said Smitha.

While some shops issued bills adding the state and central GSTs, some shops did not issue bills on July 1. Not all chemists' shop and even smaller clinics have not linked their systems with the GSTN. "We're still confused.I'm unable to give bills to my customers and selling at the MRP ratee," said a chemist from Basavanagudi.

V Harikrishnan, president of the chemists' and druggists' association, said: "It will take some time for pharmacists to account for the existing old stock. Also, it is difficult for us to track which shops have a turnover of more than Rs 75 lakh and which have less than that because depending on this, GST will be charged."

Stating that at present there are some shops which are billing GST while some others are not, he added: "Shops with a turnover more than Rs 5 lakh are billing GST and those with less turnover are not. It's becoming difficult for us to explain this to customers as they too are confused about the next system."

While the government has exempted healthcare services from GST and patients needn't pay any tax for services rendered by hospitals, GST has been levied on several inputs used in hospitals.

Non-medical products are charged 18% GST (9% each of state and central GST). "I bought my medicines and vinegar I use with my diet. I paid 18% GST for vinegar, whereas for medicines I paid 12% GST as per the bills. Even orthopaedic footware was considered as non-medical in the final bill for which I paid a total of 18% GST. With GST, my medical expenses have gone up," said Jaya Ray , who bought medicine from a corporate pharma chain outlet in Sahakar Nagar.

Higher hospital expenses

"The healthcare sector has long been outside the indirect tax ambit for various social and political reasons and continues to be exempt under GST as well. While this may appear to be patient friendly, GST applicable on expenses incurred by hospitals continues to be a cost which means patient bills may not come down under GST. In fact, hospitals would have increased costs as taxes on services and prices of medicines are expected to increase broadly by 3%. Luxury tax on room charges have been subsumed into GST and could bring some relief to patients," Sameer Agarwal, CFO, Manipal Health Enterprises Pvt Ltd.

Jagannath MS, chief financial officer, Columbia Asia Hospital said: "Though patients won't shell out more to the hospital due to GST, there are indirect ways through which healthcare providers will have to charge GST on some capital equipment and maintenance services used in medical care," he said.

"The other key impact on costs is where a hospital operates on a headquarterbranch model where costs relating to centralised functions are expended in the headquarters and the benefit of such service is being availed of by branches in other states. Such costs would be liable to GST," Jagannath added.