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The capsule manufacturers have urged the government to reduce the GST rate for empty gelatin capsules and HPMC capsules to 12 per cent or 18 per cent from the proposed rate 28 per cent.
The higher rate of 28 per cent will lead to an increase in input costs and can adversely affect the entire pharma industry and public at large.
Empty hard gelatin capsules and HPMC capsules are classified under Chapter Sub Heading 9602 00 and 9602 00 30. Under these Headings, the products attract 12.5 per cent excise-duty and 6 per cent VAT under Entry number 54 of Schedule C of Maharashtra VAT Act, 2005. These products are notified as industrial products.
They are of intermediary nature and of pharma grade and used for pharmaceutical products ie., filling of medicines with accurate dosage in empty capsules. Pharmaceutical formulations, in which pharma grade products are used, fall under HS Code 30 and are classified under GST rate of 5 per cent and 12 per cent.
However, the GST rate for the empty hard gelatin capsules and HPMC capsules has been fixed as 28 per cent (Sr No. 96). This was approved by the GST Council in their meeting held on May 18-19, 2017. The rate fitment has been beyond the equalization principle of maintaining the current tax incidence, said Ajit Singh, chairman of the Associated Capsules Group also known as ACG World Wide. ACG, being one of the largest manufacturers of empty capsules is most affected by this higher bracket.
The capsule manufacturers have sent representations to the government appealing to it to put empty hard capsules and HPMC capsules in 12-18 per cent GST bracket instead of 28 per cent bracket. Otherwise costs will go up as well that of the pharma industry resulting in higher prices for the public, Singh said.
“The GST Council has been kind enough to consider other such cases of other products rationally, and make necessary changes. They have done so as a key rationale for reduction of GST rate on 66 products under last GST Council meeting on June 11, 2017. We hope that the council will take a call on our representation too,” he said.
Echoing the concern of capsule manufacturers, the Indian Pharmaceutical Association (IPA), the oldest premier association of pharmaceutical professionals in India, has also appealed to the government to reconsider the 28 per cent GST rate fixed for the capsules.
The IPA has written to Arun Jaitley, Union finance minister, N Sitharaman, Union commerce and industry minster, Help desk, GST council, government of India urging them to keep capsules at GST of 12 per cent or 18 per cent so that the prices of drugs are within the common man's reach without seriously affecting the current prices of formulations. This will give the revenue neutrality in line with meeting the government objectives.
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