|
Pharmaceutical trade is set to save Rs. 500 crore with the government waiver on 12 per cent Goods and Service Tax (GST) for expired pharma products. Union finance ministry recently waived off 12 per cent GST for expired or damaged pharmaceutical products based on demands from the pharmaceutical trade community.
According to Indian Pharmaceutical Alliance (IPA), the pharmaceutical industry annually receives around Rs. 3,300 to Rs. 5,500 crore in expired or damaged stocks.
The expired pharma products are usually returned to manufacturers from stockists and distributors in an ideal scenario.
“Pharma trade associations and industry is happy with this government initiative”, says Dilip Mehta from Pharmaceutical Wholesalers Association (PWA).
AIOCD had earlier raised concerns faced by trade channels over transactions relating to expired and recalled products under the new GST norms. It had therefore sought resolution from the government on the issue related to expired products.
As per GST norms, a retailer will have to make a reverse sale of the expired or recalled medicines to distributors and raise a tax invoice and the same will be done by distributor to manufacturer.
Earlier, Central Board of Indirect Taxes and Customs (CBIC) has laid down detailed procedure for returning time-expired drugs or medicines under the GST regime.
As per the circular, there are two options for return of time expired goods that is to be treated as fresh supply or by issuing credit note. Under the first option, if the business returning goods is a registered entity, it may issue a tax invoice by considering the return as a fresh supply. The value of fresh supply will be equal to the value of the original supply made earlier. The recipient of the returned goods will be eligible to claim Input Tax Credit (ITC) on the basis of such tax invoice. If expired drugs are destroyed by the manufacturer, then he is required to reverse ITC availed on the return supply. The reversal is to be made on the ITC availed on such returned supply, and not on the original supply of goods.
Second option is to issue credit notes. Manufacturer/ wholesaler may issue a tax credit note and the goods may be returned under the cover of a delivery challan. Accordingly, the manufacturer/wholesaler will be able to claim a tax adjustment, subject to reversal of credit by the recipient of tax credit note.
|