Pharma sector faces business slowdown by 50% as it gears up for GST regime

Pharma sector is facing a slow down at a time the sector gears up to be compliant with the Goods and Service Tax(GST)  regime which  takes off from July 1,2017. The business decline is  by over 50 percent at wholesale/manufacturers levels. 
      

The pharmacy trade outlets are working to clear out existing stocks and maintain a minimum inventory. There is an uncertainty in the air and most of the outlets which were not paying taxes now will come under the ambit of the GST levy.  The small and unwieldy business operations which did not declare their earnings needs to suddenly buck up to the pressure of sharing the revenue details for which are they are unprepared.  So these outlets are trying to get rid of the stocks as much as possible and maintain a limited supply. However from July 1, the sector is confident that sales will be brisk and normal.

In the case of the small pharma companies  engaged in manufacture and marketing are facing a standstill in business operations. This is a temporary phase and we are certain that  post GST implementation it will be a win-win situation for the industry and the trade, said industry observers.

The best part of GST is that tax evasion will become next to impossible and the system is so designed that self compliance will be the norm in order to remain competitive . Government can expect a very good revenue growth, said Harish K Jain, director, Embiotic Laboratories and secretary, Karnataka Drugs and Pharmaceutical Manufacturers Association.

NPPA is likely to come out with a notification soon revising the prices in view of the GST, Jain  added.

According to Jatish N Sheth, director, Srushti Pharmaceuticals and former president KDPMA, liquidation of inventory has stalled supply chain sales and procurement  which has affected revenue generation anywhere from 10-25 percent or even more.

“Drug shortage is also looming large. This together with the arrival of monsoon in the country which is phase for  the onset of infectious diseases, should not  impact patients.  More over the  monsoon months are most remunerative   for  pharma companies with a growing demand for drugs for all age-groups and diseases. This time the GST could play a spoil sport.  However, we expect business to pick up  only after July 15,2017 and for now it is a visible slowdown”, stated Sheth.

"For businesses in the healthcare sector, GST is  a landscape of discussions, debates and speculations. Now, that the government has exempted healthcare services from GST, it is  good news. However, for patients or end-consumers the cost  could rise, given the increase in input costs due to GST. Any imposition of high GST on medical equipment would affect the overall cost structure of healthcare,” stated Ameera Shah, Managing Director and CEO, Metropolis Healthcare.