Projected Increase in Medicine Costs Following GST Implementation
In 2017, the GST Council set tax rates for the pharmaceutical industry at 5% for essential drugs and 12% for other formulations, contrary to the industry's zero-tax expectations. This decision was projected to cause a rise in medicine prices from July onward. Life-saving drugs for conditions like malaria and diabetes were included in the lower 5% bracket, while all other medicines fell under the 12% category. This regulatory change underscored the government's approach to pharmaceutical taxation under the new GST framework.
Impact of GST on Pharmaceutical Prices
The Goods and Services Tax (GST) rates for the pharmaceutical sector, announced on May 23, 2017, diverged significantly from industry expectations. The pharmaceutical industry had hoped for a zero-tax regime; however, the GST Council established a 5% rate for critical, life-saving medications. Other pharmaceutical products and formulations were assigned a 12% tax rate.
This decision meant that medicine prices were anticipated to rise starting from July. Essential drugs, used in the treatment of conditions such as malaria, HIV-AIDS, tuberculosis, and diabetes, were categorized under the 5% bracket. All other medicinal items were placed in the 12% tax category. This information was initially published by the Economic Times.