Industry Body Calls For Reduction In GST On Active Pharmaceutical Ingredients

Industry body Confederation of Indian Industries (CII) has called for a reduction in Goods and Services Tax (GST) applicable to Active Pharmaceutical Ingredients (APIs) in line with pharma formulations. CII has also demanded that the customs duty and GST should be exempted for all items procured by drug makers for research and development purpose, it said in its Pre-Budget Memorandum. Finance Minister Nirmala Sitharaman will present the Union Budget for financial year 2020-21 in Parliament on February 1.

Explaining the premise for the lower GST on APIs, the industry body said, "Pharma formulations attract GST of 12 per cent whereas inputs active pharmaceutical ingredients (API) have GST of 18 per cent which has led to accumulation of Input tax Credit. This situation needs to be corrected by reducing GST on API to 12 per cent."

"Pharmaceuticals are medicinally effective chemicals converted to dosage form, which are suitable for patients. In its basic chemical form, pharmaceuticals are bulk drugs and when converted in final dosage these are formulations."

"The indigenous pharmaceutical industry has been playing a crucial role in the social well-being of the country not only by discovering, developing and manufacturing, but also by distributing quality medicines," it added in its pre-Budget Memorandum.

Calling for exemption of GST and customs duty on items procured for R&D by the drug makers, the industry body said, "Partial exemptions are provided for specified items which are Imported or domestically procured by the R&D units registered under Department of Scientific and Industrial Research (DSIR)."

"The exemption is granted over and above 5 per cent on such procurement but only on specified items. In case the items purchased are not in the specified list, full duty/tax has to be paid. This has increased the cost of R&D activities and resulted in huge accumulation of GST input tax credits."