T.Y.B.A.

PROJECT REPORT ON
“IMPACT OF GST ON MEDICAL SECTOR”

SEMESTER VI
(2020-2021)

A PROJECT SUBMITTED TO
UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION ON THE DEGREE OF
BACHELOR IN COMMERCE (ACCOUNTING AND FINANCE) UNDER THE
FACULTY OF COMMERCE
BY
YASHVI HARISH NAGDA

ROLL NO.: 61

SEAT NO.:

UNDER THE GUIDANCE OF

DR. MEERA RAJAWAT

S.K.SOMIAYA DEGREE COLLEGE OF ARTS SCIENCE AND COMMERCE,

VIDHYAVHAR (E), MUMBAI: 400077

MARCH - 2021

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 CERTIFICATE

This is to certify that Mr./Ms. YASHVI HARISH NAGDA has worked and duly
completed his/her Project Work for the degree of BACHELOR OF ACCOUNT ING
AND FINANCE under the faculty of commerce in the subject of “FINANCE” AND
his/her project is titled as “IMPACT OF GST ON MEDICAL SECTOR” under my
supervision.

I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any degree or diploma of any
university.

It is his/her own work and facts reported by his/her personal findings and investigations.

Internal Guide External Examiner

DR. MEERA RAJAWAT (Signature with date)

College Seal

Principal Course Coordinator

Dr. MANALI LONDHE DEEPAK CHAVAN

DECLARATION

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I the undersigned Ms. YASHVI HARISH NAGDA, hereby declare that the work
embodied in this project work titled as “IMPACT OF GST ON MEDICAL SECTOR”,
forms my own contribution to the research work carried out under the guidance of “DR.
MEERA RAJAWAT” is a result of my own research work and has not been submitted
previously for any degree or diploma of any university.

Wherever references have been made to previous work of others, it has been clearly
indicated as such and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

YASHVI HARISH NAGDA

Certified by:

DR. MEERA RAJAWAT

ACKNOWLEDGEMENTS

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To list all who have helped me is difficult because they are so numerous and the depth is
so enormous.

I would like to acknowledge the following as being the idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me this chance to do
this project.

I would like to thank my Principal, Dr. Manali Londhe for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator Deepak Chavhan, for her moral support
and guidance.

I would also like to express my sincere gratitude towards my project guide DR. Meera
Rajawat whose guidance and care made the project successful.

I would like to thank my college library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and everyone who have directly or indirectly helped me
in the completion of the project especially My Parents And Peers who supported me
throughout my project.

INDEX

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SR.NO. PARTICULARS PG.NO

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 EXECUTIVE SUMMARY

1 CHAP 1: INTRODUCTION 1-18

1.1 Meaning of GST 1

1.2 Formation 2

1.3 Implementation 3

1.4 Tax 4

1.5 HSC Code 5

1.6 Rate 5

1.7 E-way Bill 6

1.8 Reverse Charge Mechanism 7

1.9 Goods Kept Outside GST 7

1.10 Revenue Distribution 8

1.11 GST Council 8

1.12 GSTN 8

1.13 GST on Medicines and Medical Supplies 9

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 1.14 Drugs Price Control Order 14

1.15 Objectives 14

1.16 Impact of GST on Medicines and Medical Supplies 15

1.17 Effects of GST on Pharma Industry 15

2 CHAP 2: RESEARCH METHODOLOGY 19-21

2.1 Objective of Study 19

2.2 Scope of Study 19

2.3 Data Collection 20

2.4 Sampling Technique 20

2.5 Limitations of Study 21

3 CHAP 3: LITERATURE REVIEW 22-27

4 CHAP 4: DATA ANALYSIS AND DATA 28-42

INTERPRETATION

5 CHAP 5: CONCLUSION AND SUGGESTION 43-44

5.1 Findings 43

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 5.2 Suggestion 43

5.3 Conclusion 44

BIBLIOGRAPHY 45

ANNUXRE 46-48

EXECUTIVE SUMMARY

The project on “IMPACT OF GST ON MEDICAL SECTOR” is to analyze about causes

and effect of GST on medical stores.

This project covers the analysis about GST and its effects on medical stores and
pharmaceutical companies. I have conducted survey and collected data from 45 medical
stores of Dombivli region through questionnaire method.

This project includes GST on medicines and other medical supplies starting with
introduction of GST, GST rates applied on medicines and medical supplies, impact of
GST on medicines and other pharmaceutical companies and effect of GST on same.

In this research I came to know that GST has affected almost all the sectors of economy.
GST has both positive as well as negative effects on medical stores as well as
pharmaceutical companies. Further there is detailed report on the topic.

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9
 1. INTRODUCTION

1.1 Meaning of GST

Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on
the supply of goods and services. It is a comprehensive, multistage, destination-based tax:
comprehensive because it has subsumed almost all the indirect taxes except a few state
taxes. Multi-staged as it is, the GST is imposed at every step in the production process,
but is meant to be refunded to all parties in the various stages of production other than the
final consumer and as a destination-based tax, it is collected from point of consumption
and not point of origin like previous taxes.

Goods and services are divided into five different tax slabs for collection of tax- 0%, 5%,
12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are
not taxed under GST and instead are taxed separately by the individual state
governments, as per the previous taxsystem. There is a special rate of 0.25% on rough
precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other
rates on top of 28% GST applies on few items like aerated drinks, luxury cars and
tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-
GST, most goods are expected to be in the 18% tax range.

The tax came into effect from 1 July 2017 through the implementation of the One
Hundred and First Amendment of the Constitution of India by the Indian government.
The GST replaced existing multiple taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST Council which consists of
the finance ministers of the central government and all the states. The GST is meant to
replace a slew of indirect taxes with a federated tax and is therefore expected to reshape
the country's 2.4 trillion dollar economy, but its implementation has received criticism.
Positive outcomes of the GST includes the travel time in interstate movement, which
dropped by 20%, because of disbanding of interstate check posts.

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1.2 Formation
The reform of India's indirect tax regime was started in 1986 by Vishwanath Pratap
Singh, Finance Minister in Rajiv Gandhi’s government, with the introduction of the
Modified Value Added Tax (MODVAT). Subsequently, Prime Minister P V Narasimha
Rao and his Finance Minister Manmohan Singh, initiated early discussions on a Value
Added Tax (VAT) at the state level. A single common "Goods and Services Tax (GST)"
was proposed and given a go-ahead in 1999 during a meeting between the Prime Minister
Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI
governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed
by the Finance Minister of West Bengal, Asim Dasgupta to design a GST model.

The Asim Dasgupta committee which was also tasked with putting in place the back-end
technology and logistics (later came to be known as the GST Network, or GSTN, in
2015). It later came out for rolling out a uniform taxation regime in the country. In 2002,
the Vajpayee government formed a task force under Vijay Kelkar to recommend tax
reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by
the 12th Finance Commission.

After the defeat of the BJP-led NDA government in the 2004 Lok Sabha election and the
election of a Congress-led UPA government, the new Finance Minister P Chidambaram
in February 2006 continued work on the same and proposed a GST rollout by 1 April
2010. However, in 2011, with the Trinamool Congress routing CPI(M) out of power in
West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta
admitted in an interview that 80% of the task had been done.

The UPA introduced the 115th Constitution Amendment Bill on 22 March 2011 in the
Lok Sabha to bring about the GST. It ran into opposition from the Bharatiya Janata Party
and other parties and was referred to a Standing Committee headed by the BJP's former
Finance Minister Yashwant Sinha. The committee submitted its report in August 2013,
but in October 2013 Gujarat Chief Minister Narendra Modi raised objections that led to
the bill's indefinite postponement. The Minister for Rural Development Jairam Ramesh
attributed the GST Bill's failure to the "single handed opposition of Narendra Modi".

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In the 2014 Lok Sabha election, the Bharatiya Janata Party (BJP)-led NDA government
was elected into power. With the consequential dissolution of the 15th Lok Sabha, the
GST Bill – approved by the standing committee for reintroduction – lapsed. Seven
months after the formation of the then Modi government, the new Finance Minister Arun
Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In
February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May
2016, the Lok Sabha passed the Constitution Amendment Bill, paving way for GST.
However, the Opposition, led by the Congress, demanded that the GST Bill be again sent
back for review to the Select Committee of the Rajya Sabha due to disagreements on
several statements in the Bill relating to taxation. Finally, in August 2016, the
Amendment Bill was passed. Over the next 15 to 20 days, 18 states ratified the
Constitution amendment Bill and the President Pranab Mukherjee gave his assent to it.

A 21-member selected committee was formed to look into the proposed GST laws. After
GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill),
the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory
Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax
(Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed
by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017
and were then enacted as Acts on 12 April 2017. Thereafter, State Legislatures of
different States have passed respective State Goods and Services Tax Bills. After the
enactment of various GST laws, Goods and Services Tax was launched all over India
with effect from 1 July 2017. The Jammu and Kashmir state legislature passed its GST
act on 7 July 2017, thereby ensuring that the entire nation is brought under a unified
indirect taxation system. There was to be no GST on the sale and purchase of securities.
That continues to be governed by Securities Transaction Tax (STT).

1.3 Implementation
The GST was launched at midnight on 1 July 2017 by the President of India, and the
Government of India. The launch was marked by a historic midnight (30 June – 1 July)

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session of both the houses of parliament convened at the Central Hall of the Parliament.
Though the session was attended by high-profile guests from the business and the
entertainment industry including Ratan Tata, it was boycotted by the opposition due to
the predicted problems that it was bound to lead for the middle and lower class Indians.
The tax was strongly opposed by the opposing Indian National Congress. It is one of the
few midnight sessions that have been held by the parliament - the others being the
declaration of India's independence on 15 August 1947, and the silver and golden jubilees
of that occasion. After its launch, the GST rates have been modified multiple times, the
latest being on 22 December 2018, where a panel of federal and state finance ministers
decided to revise GST rates on 28 goods and 53 services. Members of the Congress
boycotted the GST launch altogether. They were joined by members of the Trinamool
Congress, Communist Parties of India and the DMK. The parties reported that they found
virtually no difference between the GST and the existing taxation system, claiming that
the government was trying to merely rebrand the current taxation system.[citation
needed] They also argued that the GST would increase existing rates on common daily
goods while reducing rates on luxury items, and affect many Indians adversely, especially
the middle, lower middle and poorer income groups.

1.4 Tax
Taxes subsumed
The single GST subsumed several taxes and levies, which included central excise duty,
services tax, additional customs duty, surcharges, state-level value added tax and Octroi.
Other levies which were applicable on inter-state transportation of goods have also been
done away with in GST regime. GST is levied on all transactions such as sale, transfer,
purchase, barter, lease, or import of goods and/or services. India adopted a dual GST
model, meaning that taxation is administered by both the Union and state governments.
Transactions made within a single state are levied with Central GST (CGST) by the
Central Government and State GST (SGST) by the State governments. For inter-state
transactions and imported goods or services, an Integrated GST (IGST) is levied by the
Central Government. GST is a consumption-based tax/destination-based tax, therefore,

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taxes are paid to the state where the goods or services are consumed not the state in
which they were produced. IGST complicates tax collection for State Governments by
disabling them from collecting the tax owed to them directly from the Central
Government. Under the previous system, a state would only have to deal with a single
government in order to collect tax revenue.

1.5 HSN Code

India is a member of World Customs Organization (WCO) since 1971. It was originally
using 6-digit HSN codes to classify commodities for Customs and Central Excise. Later
Customs and Central Excise added two more digits to make the codes more precise,
resulting in an 8 digit classification. The purpose of HSN codes is to make GST
systematic and globally accepted. HSN codes will remove the need to upload the detailed
description of the goods. This will save time and make filing easier since GST returns are
Automated. If a company has turnover up to INR 15 million in the preceding financial
year then they did not mention the HSN code while supplying goods on invoices. If a
company has turnover more than INR 15 million but up to INR 50 million, then they
need to mention the first two digits of HSN code while supplying goods on invoices. If
turnover crosses INR 50 million then they shall mention the first 4 digits of HSN code on
invoices.

1.6 Rate
The GST is imposed at variable rates on variable items. The rate of GST is 18% for soaps
and 28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST
for tickets that cost less than Rs. 100 and 28% GST on tickets costing more than Rs.100
and 28% on commercial vehicle and private and 5% on readymade clothes. The rate on
under-construction property booking is 12%. Some industries and products were
exempted by the government and remain untaxed under GST, such as dairy products,

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products of milling industries, fresh vegetables & fruits, meat products, and other
groceries and necessities.

Check posts across the country were abolished ensuring free and fast movement of goods.
Such efficient transportation of goods was further ensured by subsuming octroi within the
ambit of GST.

The Central Government had proposed to insulate the revenues of the States from the
impact of GST, with the expectation that in due course, GST will be levied on petroleum
and petroleum products. The central government had assured states of compensation for
any revenue loss incurred by them from the date of GST for a period of five years.
However, no concrete laws have yet been made to support such action. GST council
adopted concept paper discouraging tinkering with rates.

1.7 E-Way Bill

An e-Way Bill is an electronic permit for shipping goods similar to a waybill. It was
made compulsory for inter-state transport of goods from 1 June 2018. It is required to be
generated for every inter-state movement of goods beyond 10 kilometres (6.2 mi) and the
threshold limit of ₹50,000 (US$700).It is a paperless, technology solution and critical
anti-evasion tool to check tax leakages and clamping down on trade that currently
happens on a cash basis. The pilot started on 1 February 2018 but was withdrawn after
glitches in the GST Network. The states are divided into four zones for rolling out in
phases by end of April 2018.

A unique e-Way Bill Number (EBN) is generated either by the supplier, recipient or the
transporter. The EBN can be a printout, SMS or written on invoice is valid. The GST/Tax
Officers tally the e-Way Bill listed goods with goods carried with it. The mechanism is
aimed at plugging loopholes like overloading, understating etc. Each e-way bill has to be
matched with a GST invoice.

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Transporter ID and PIN Code now compulsory from 01-Oct-2018.It is a critical
compliance-related GSTN project under the GST, with acapacity to process 75 lakh e-
way bills per day.

Intra-State e-Way Bill

The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, Telangana and
Uttar Pradesh, which account for 61.8% of the inter-state e-way bills, started mandatory
intrastate e-way bill from 15 April 2018 to further reduce tax evasion. It was successfully
introduced in Karnataka from 1 April 2018.[34] The intrastate e-way bill will pave the
way for a seamless, nationwide single e-way bill system. Six more states Jharkhand,
Bihar, Tripura, Madhya Pradesh, Uttarakhand and Haryana will roll it out from 20 April
18. All states are mandated to introduce it by 30 May 2018.

1.8 Reverse Charge Mechanism

Reverse Charge Mechanism (RCM) is a system in GST where the receiver pays the tax
on behalf of unregistered, smaller material and service suppliers. The receiver of the
goods is eligible for Input Tax Credit, while the unregistered dealer is not. The central
Government released Rs 35,298 crore to the state under GST compensation. For the
implementation, this amount was given to the state to compensate the revenue. Central
government has to face many criticisms for delay in compensation.

1.9 Goods kept outside the GST

Alcohol for human consumption (i.e., not for commercial use). Petrol and petroleum
products (GST will apply at a later date), i.e. petroleum crude, high-speed diesel, motor
spirit (petrol), natural gas, aviation turbine fuel.

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1.10 Revenue Distribution
Revenue earned from GST (intra state transaction - seller and buyer both are located in
same state) is shared equally on 50-50 basis between central and respective state
governments. Example: if state of Goa has collected a total GST revenue (intra state
transaction - seller and buyer both are located in same state) of 100 crores in month of
January then share of central government (CGST) will be 50 crores and remaining 50
crores will be share of Goa state government (SGST) for month of January. For
distribution of IGST (inter state transaction - seller and buyer both are located in different
states) collection, revenue is collected by central government and shared with state where
good is imported. Example: 'A' is a seller located in state of Goa selling a product to 'B' a
buyer of that product located in state of Punjab, then IGST collected from this transaction
will be shared equally on 50-50 basis between central and Punjab State Government only.

1.11 GST Council

GST Council is the governing body of GST having 33 members, out of which 2 members
are of centre and 31 members are from 28 state and 3 Union territories with legislation.
The council contains the following members (a) Union Finance Minister (as chairperson)
(b) Union Minister of States in charge of revenue or finance (as member) (c) the
ministers of states in charge of finance or taxation or other ministers as nominated by
each states government (as member). GST Council is an apex member committee to
modify, reconcile or to procure any law or regulation based on the context of goods and
services tax in India. The council is headed by the union finance minister Nirmala
Sitharaman assisted with the finance minister of all the states of India. The GST council
is responsible for any revision or enactment of rule or any rate changes of the goods and
services in India.

1.12 Goods and Services Tax Network (GSTN)

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The GSTN software is developed by Infosys Technologies and the Information
Technology network that provides the computing resources is maintained by the NIC.
"Goods and Services Tax Network" (GSTN) is a nonprofit organization formed for
creating a sophisticated network, accessible to stakeholders, government and taxpayers to
access information from a single source (portal). The portal is accessible to the Tax
Authorities for tracking down every transaction, while taxpayers have the Ability to
connect for their tax returns.

The GSTN's authorized capital is ₹10 crore (US$1.4 million) in which initially the
Central Government held 24.5 percent of shares while the state Government held 24.5
percent. The remaining 51 percent were held by non-Government financial institutions,
HDFC and HDFC Bank hold 20%, ICICI Bank holds 10%, NSE Strategic Investment
holds 10% and LIC Housing Finance holds 11%. However, later it was made a wholly
owned government company having equal shares of state and central government.
Around 38 lakh new taxpayers have registered under GST regime and the total count has
crossed one crore if we include the 64 lakh earlier ones. Total number of taxpayers were
above 1.14 crore in October 2018.

1.13 GST on Medicines and Medical Supplies

After introduction of GST on pharmaceuticals and medical supplies in India are taxed at
four separate rates of Nil, 5%, 12% and 18%. The nil GST on medicines is currently only
applicable to human blood and its derivatives as well as all types of contraceptives. The
highest GST rate on medicines i.e. 18% is applicable only to products containing nicotine
polacrilex such as nicotine gum. The lowest GST rate of 5% (apart from the nil GST rate)
is applicable to pharmaceutical products designated as “life-saving drugs” including oral
rehydration salts, vaccines, as well as medicines such as those used to treat diabetes,
tuberculosis, HIV-AIDS, malaria, etc. As of yet, no pharmaceutical products are featured
in the highest 28% GST rate.

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Nil GST Rate Pharmaceutical Products
The zero GST on medicines is currently applicable only to the following products:

● Human blood and its components used in medicine

● All types of contraceptive products

5% GST on Medicines and other Medical Supplies

5% is the lowest GST rate on medicines and medical supplies (other than nil GST) and
applicable to some key types of pharmaceutical products such as:

● Human/animal blood vaccines

● Diagnostic kits for detecting all types of hepatitis
● Cyclosporine
● Oral rehydration salts
● Insulin
● Medicaments (inclusive of veterinary medicines) without brand name used
● in bio-chemic medical system.
● Deferiprone or desferroxamine injection.
● Medicines or drugs as well as their esters and salts as well as diagnostic
● test kits
● Formulations manufactured from bulk drugs specified in List 2 of central excise
notification 12/2012.
● Ayurvedic, Siddha, Unani, Homeopathic or Bio-chemic medicaments
manufactured in accordance with formulations prescribed in appropriate
pharmacopoeia/ First Schedule of the Drugs and Cosmetics Act, 1940.
● Artificial kidneys as well as disposable micro barriers/sterilized dialyzers of
artificial kidneys Artificial limbs, wheel chairs, crutches, walking frames, etc.
Coronary stents/stent systems for use with cardiac catheters.
● List is indicative and many other pharmaceutical products are included in
● the 5% GST rate category.

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12% GST on Medical and Pharmaceutical Supplies
The 12% GST rate is currently applicable to a majority of medicines and other
pharmaceutical preparations. Some of the key products featuring the 12% GST Rate are
as follows:

● Glands (including gland extracts) and various organs (including organ extracts)
dried or powdered for organo-therapeutic uses
● Heparin and various heparin salts
● Any human/animal substances used for prophylactic or therapeutic purposes
● Animal blood prepared for diagnostic, therapeutic and prophylactic purposes
● Animal blood fractions including antisera, other blood fractions as well as related
immunological products
● Toxins, cultures of micro-organisms (excluding yeasts)and similar products for
medical use
● Toothpowder
● Bandage, wadding, gauge and similar types of items including dressings,
poultices and adhesive plasters for use in surgical, veterinarian, dental or medical
procedures (coated/impregnated with pharmaceutical substances)
● Pharmaceutical products such as sterile surgical catgut, sterile absorbable
surgical/dental yarns, sterile tissue adhesives for surgical wound closure, sterile
luminaria, sterile luminaria tents, waste pharmaceuticals, etc.
● Diabetic foods, blood glucose monitoring system (glucometer) and test Strips.
● Atrial septal defect occlusion device/ Patent Ductus Arteriousus Medical grade
oxygen, hydrogen peroxide, etc.
● Photographic film/plates for use in medical use X-rays.

*List is indicative and many other pharmaceutical products are included in the 12% GST
on medicines and medical products category.

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18% GST on Pharmaceutical Preparations
The 18% GST rate is the highest applicable to pharmaceutical products in India and only
a few medicinal items are included in this section. The following are
medicines/pharmaceutical-related products which attract this high GST rate:

● Nicotine polacrilex gum

● Preparations for dental/oral hygiene including denture powders and fixative
● pastes, dental floss, etc. in individual retail packaging (excluding toothpowder)
● Various hair care products (excluding mehendi pate in cones)
● Dental, surgical, medical or veterinary furniture such as hospital beds, operating
tables, examination tables etc.

*List is indicative and many other pharmaceutical products are included in the 18% GST
on medicines and medical products category.

Nil GST on Medical Services

Health care services for both humans and animals (veterinary medical Services) are
included in the GST Act. Under existing rules, there is nil GST on health care services
provided by an authorized medical practitioner, licensed medical or paramedical clinic.
The same nil GST rate also applies to any and all medical services provided during
transportation of a patient by ambulance. In case of veterinary health care services
provided to birds/animals at authorized clinics, the applicable GST rate is also nil. Nil
GST on Medicines used during Hospitalization Initially there was confusion regarding
GST charges on medicines and other medical consumables used during hospitalization
(in-patient treatment). In response to a query on this issue, the Authority of Advance
Ruling (AAR) in Kerala has ruled that supply of medications, implants and other
consumables used (e.g. diagnostic supplies and surgical equipment) during
hospitalization will feature nil GST. As per the AAR, these are to be included as part of
composite supplies included as part of healthcare services hence the nil GST rate will be
applicable. This advance ruling is applicable to treatments carried out at all registered
hospitals, clinics and physicians across India.

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Impact of GST on Medicines and Medical Supplies under the VAT regime, medications
and other medical supplies were impacted by cascading taxation as both excise duty and
VAT were applicable to all medical supplies including medicines. This has been
eliminated through the introduction of GST on medicines and other healthcare
productions. In case of various lifesaving medications, the price of medicines under GST
has remained nearly the same. This is because a VAT rate of 4% on 65% of MRP (i.e.
4% VAT was on top of excise duty) being replaced by GST rate of 5%, leading prices to
be maintained at the same level in terms MRP. In case of dietary supplement products,
the removal of excise duty has led to increased profitability and lower prices as these tax
reduction benefits get passed on to customers.

The main impact of GST implementation has been on the supply chain of Pharmaceutical
products. Under the earlier VAT regime, the central state tax (CST) payable for interstate
transactions was 2%. In order to avoid this tax burden, pharmaceutical companies
maintained depots in every state/union territory where they operated. Subsequent to
introduction of GST on medicines and other pharmaceutical products, the supply process
is expected to get more streamlined as more companies employ a hub and spoke model
that reduces warehousing costs and optimizes the benefit of Input Tax Credit under GST.

Nil GST on Medicines used during Hospitalization

Initially, there is a confusion regarding the GST charges applicable to medicines and
medical consumables used during hospitalization. To clear all the doubts related to this,
the authority of Advance ruling (AAR) in Kerala has ruled the supply of medications,
implants and other consumables used. (e.g. diagnostic supplies and surgical equipment)
during hospitalization will feature nil GST. As per the AAR, these are to be included as
part of composite supplies included as part of healthcare services hence the nil GST rate
will be applicable. This advance ruling applies to treatments carried out at all registered
hospitals, clinics and physicians across India.

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1.14 Drug Price Control Order (DPCO)
Under the Essential Commodities Act, a Drug Price Control Order is issued to ensure that
the costs of crucial medicines which are required in large amounts are set in such a way
that they are reasonable for each person. The order has its roots in 1970 when the
government realized the sick effects of the high profitability of medical drugs and the
companies which made them.

1.15 Objective
The 122nd improvement Bill was passed as the Constitution's One Hundred and Twenty-
Second Amendment Act, 2017. It will be affecting several industries, businesses, and
companies at the same time. The pharmaceutical industry occupies a unique case owing
to the medicinal and pharmaceutical requirements it provides. If taken the share of GDP,
it contributes to 5% of it. The Government of India with GST Council and its Chairman,
Union Finance Minister of India – Arun Jaitley have introduced it so as to enhance FDI
(Foreign Direct Investment). The alteration will bring about some changes in each
individual industry.

Goods and Service Tax is expecting to have a encouraging impact on the Indian
Pharmaceutical Industries as it will decrease the manufacturing cost since eight different
taxes are levied in the pharmaceutical industries helps in easy going business. It will
eradicate the cascading effect of multiple taxes applied on One Product.

The Biggest reward for the Industries: conventional Cost and delivery Model will get
replaced by supply chain efficiencies due to discontinuance of the Central Sales tax and
interstate transactions between two dealers will become tax neutral. This will lead to a
decrease in cost which can be added to margins and even consumers will get profit from
it. This will provide absolute freedom to the companies to discover strategic supply chain
and distribution channel. Additionally, it is uncertain till now that the healthcare services
and lifesaving drugs will continue to be exempted or not under GST Regime. Under
Current Indirect Taxation, these are exempted from Excise Duty and Custom Duty and a
few states charge 5% taxes on Medicines.

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The rate of GST should be kept at a relative level in the lowest slab for the
pharmaceutical industries. Analysts specify the GST rate up to 12% to be neutral tax rate
whereas no matter which above will have an inflationary effect on pricing. GST Council
has finalized the tax rates of the goods in Nil, 5 percent, and 12 percent kind.

1.16 Impact of GST on medicines and the medical supplies

As per the VAT regime, the impact on medications and other medical supplies was
impacted by the cascading taxation as both excise duty and VAT applied to all medical
supplies including medicines. After the GST, the cascading effect reduces to some extent
on medicines and other healthcare productions. In the case of various lifesaving
medications, the cost of the medicines under GST has remained nearly the same.

VAT rate of 4% on 65% of MRP being replaced by GST rate of 5%, as a result leading
prices to be maintained at the same level on terms of MRP.

In the case of diet-related supplementary products, removal of excise duty led to bring an
increase in the profitability and lower prices as these tax reduction benefits get passed on
to the customers.

The main impact of GST implementation is reflected in the supply chain of

pharmaceutical products. Earlier, in the VAT regime, Central State Tax payable for
interstate transactions was 2%. To reduce the tax burden, pharmaceutical companies
created depots in every state and union territory in which they were operational.

After the GST implementation of medicines and other pharmaceutical products, the
supply process becomes more streamlined. Most of the companies employ a hub and
spoke model to reduce the cost of warehousing. It also results in optimizing the benefit of
Input Tax Credit under the GST.

1.17 Effect of GST On Pharma Industry

15
GST or Goods and Service Tax is an indirect tax system which takes account
consumption done through sale, manufacture, and consumption of goods & services at a

national level which mainly involves companies, industries and services sector. The main

idea behind it is to abolish the tax levied of state and central government. It involves
three stages:

● State GST (SGST) (levied by State)

● Central GST (CGST) (levied by Centre)
● Integrated GST (IGST) (levied by Central Government on inter-State supply of
goods and service)

GST involves elimination and combination of thirteen indirect taxes which are as
follows:

● Value Added Tax (VAT)

● Taxes applicable on lotteries
● Service Tax
● Purchase Tax
● Octroi Duty
● Luxury Tax
● Food Tax
● Entry Tax
● Entertainment Tax
● Commercial Tax
● Central Sales Tax (CST)
● Central Excise Duty
● Advertisement taxes

1.17. a) Positive Effects of GST On Pharma Industry

16
Positive Effects of GST On Pharma industry aborts the cascading effect of the tax which
involved multiple taxes applied on only one Product. The costing and taxation system
will be simplified with only mountainous of three accounts. It will create a common
market for everyone with an equal opportunity towards growth across various states. Due

to discontinue of the Central Sales Tax and Interstate transactions between two dealers

the Traditional Cost and Distribution Model will get replaced by supply chain
efficiencies and tax will become neutral.

Under GST, the life-saving essential drugs like the Oral re- hydration salts, Diagnostic
Kits for detection of all types of hepatitis and various other life-saving injections ad drugs
fall under the slab of 5%.

Bonus/Discount Schemes, Free-drugs samples, Interstate stock transfer, etc are said to be
costlier for firms because of its applicability of phases of the supply chain.

Pharma manufacturing generic/branded formulations/ dietary supplement companies who

were suffering because of heavy excise duty will see a great profit due to reduced
taxation and low manufacturing cost for all firms.

The maximum GST on bulk drugs is 18% and on formulations, it will be around 5% &
12% at maximum. This means the formulators will be paying more tax through GST.
Thus, they will be charged less on formulations. It means the input credit will be
accumulated which will be refunded itself.

Pharma companies and businessmen will find the freedom to explore strategic supply
chain and distribution channel.

CENVAT CREDIT is a credit balance in a bank account which can be refunded/ adjusted
towards the central excise on the purchase or duty paid on a final product. The issue
seems to finish for pharma industry due to GST charging single rate for goods and
services.

1.17. b) Negative Effects of GST on Pharma Industry

17
There are some negative effects on the pharma industry:

Many Ayurvedic products are falling in the slab of 12% to 15% as many of the ayurvedic
products falling under cosmetic range.

GST is said to increase the indirect tax paid by pharma companies by 60% and MRP by 4
percent. Thus, leaving a Tax rate of 15% which is said to be 18% for diagnostics and
reagents.

Other pharma drugs, medicines, Pharma products, and medical technology products are
ranged between 5% or 12% with mostly being a total tax (including VAT) of 11.5 to 12.5
percent to 18%.

18
 2. RESEARCH METHODOLOGY

Methodology is the key aspect which governs the outcome of the research. It
encompasses and directs the researcher to conduct the research in a systematic process
which ensures and facilitates the accuracy of the outcomes. It deals with the data
collected for the study, sources of data, sampling plan of the study, population of the
study, location of the research, instrument used to collect data, method of collecting data,
analysis and interpretation of the collected data with different statistical tools in order to
find out the strength of the collected data and limitations of the study. 

2.1 OBJECTIVE OF STUDY

1) To study the causes and effects of GST on medical stores.

2) To study the tax rate applicable of medicines and medical supplies.

3) To study both the positive as well as the negative effects of GST on

pharmaceutical companies.

4) To study the impact of GST on both medicines and medical supplies.

5) To study the formation of GST applicable on medicines and medical supplies.

2.2 SCOPE OF STUDY

1) The study is based on impact of GST medical stores of a particular geographical
region.

2) The scope of study is subjective to responses of the owners of medical stores.

19
3) The sample size is limited that is 45 respondent and that is why the scope of
study is narrow which is restricted to geographical area i.e. Dombivli.

2.3. DATA COLLECTION

In the Research project, both the primary as well as secondary method of data
collection was considered.

1) Primary method
Primary data was collected using questionnaire as a tool for data collection. The data
was collected through personal contact with the help of well-designed questionnaires.
The questionnaire was drafted in order to obtain information about the impact of GST
on medical sector and to get reviews and opinions of respondents. Questions were
framed to elicit free and frank responses from the respondent. Superficial questions
were avoided. 

The questionnaire was distributed among the respondents by the research personally.
The researcher assured the respondents to use the information strictly for research
purpose.

2. Secondary method
Secondary data was collected from sources like books , journals, and internet
websites.

2.4 SAMPLING TECHNIQUE

1. Sampling Population 
The study has been carried out on a micro level and hence, the respondents include
owners of medical stores who are residing in Dombivli. 

2. Sample size
The sample size is 45 medical stores of Dombivli.

3. Sampling method

20
The respondents were selected by the method of convenient sampling. Convenient
sampling method is used to collect information from owners of medical stores.

2.5. LIMITATIONS OF THE STUDY

The research is based on primary as well as secondary data. Hence there are
certain limitations that may affect the research study. The limitations of the study
are stated below:

1) Due to time constraints, the data obtained is limited to 45 respondents. The

conclusion and recommendation may not reflect the real situation. 

2) The study is mainly based on the primary data collected from 45 respondents in
Dombivli.

3) This is an academic effort, and it is limited to cost, time and geographical area.

4) An interpretation of this study is based on the assumption that the respondents

have given correct information. 

5) During the study, few respondents were not willing to express their opinion and
views on their investment pattern.

21
 3. LITERATURE REVIEW

The Gujarat Authority of Advance Ruling (AAR) that the medical Store providing
medicines at a lower rate amounts to the supply of goods and GST Registration is
required for medical stores run by Charitable Trust.

The applicant, M/s Nagri Eye Research Foundation is a Charitable Trust and is running a
medical store where medicines are given at a lower rate and the motive of the trust is not
profit.

The applicant has sought the advance ruling on the issues whether GST Registration is
required for medical stores run by Charitable Trust and whether medical stores providing
medicines at a lower rate amounts to the supply of goods.

The Authority consisting of Sanjay Saxena and Mohit Agarwal ruled that the medical
Store providing medicines at a lower rate amounts to the supply of goods and GST
Registration is required for medical stores run by Charitable Trust.

“Applicant is selling medicines from its medical store. Medicine is goods as per
subsection 52 of Section 2 of the CGST Act, 2017. Medicine is a taxable supply as per
subsection 108 of section 2 of the CGST Act, 2017 and GST is leviable on medicine as
per Chapter-30 of HSN code. Therefore, the sale of medicine by the applicant is a taxable
supply of goods. The applicant is providing medicines from its medical store at a lower
rate so the price paid by the customers is a consideration for the applicant as defined in
subsection 31 of Section 2 of the CGST Act, 2017. Further, the activity of the supply of
goods by the applicant does not fall under the list appearing in Schedule-III of the CGST
Act, 2017. Therefore, we conclude that the applicant is making taxable supply from its
medical store, so as and when aggregate turnover (here medicine) of applicant exceeds
threshold limit as specified in sub-section(1) of Section 22 of the CGST Act, 2017, the
applicant has to obtain registration under the relevant provisions of the CGST Act, 2017,”
the AAR said.

22
Shivam Sharma executive at HTC India
Most of the drugs mentioned under the 5% bracket are used to cure malaria, HIV-AIDS,
tuberculosis, and diabetes which were previously charged VAT around 4%. Nicotine
polacrilex gum is the only pharmaceutical product to be charged at the rate of 18%.
Cipla, the brand which produces nicotine gums, will probably be impacted from the rate
fixed at 18%.

No clarification has been provided by the government on the issue of manufacturers

operating in excise-free manufacturing zones paying more tax under GST. Most of these
manufacturers are competitive in the pharmaceutical industry is due to the excise benefit
as they are situated in remote places.

Earlier, Ayurvedic drugs or medicines were charged an average VAT of 4% and excise of
1.5% due to the excise free manufacturing zone benefit. Under GST, Ayurvedic
medicines could get costlier as they would be taxed at the rate of 12%.

Since the distribution channel was not involved in the payment of tax and filing tax
returns, they will now need to get registered and file the minimum 37 returns annually as
required under GST. A lot of the times, medicines are provided without bills in India.
GST would curb such practices as providing medicine without the bill would not be
beneficial for anyone in the distribution chain.

The government needs to still provide clarification on the inclusion of the current benefit
for the manufacturers under excise for operating from the excise free manufacturing
zones. The pharmaceutical industry is also asking for more information on the
implementation of GST on the MRP of pharmaceutical products.

GST Edge lives in Mumbai

GST is expected to be beneficial for pharmaceuticals because of following reasons -

From the consumers point, the price of the medicines will fall as 8 different taxes will be
subsumed into one under GST. CST will be discontinued which will be a major

23
advantage as it will lead to reduction in the transaction cost. The retailer will be able to
manage supply chains better. There will also be a seamless flow of input credit. The
warehouses will be consolidated and the logistics cost will reduce. However, there is no
clarity on the rates, exemptions and concessions under GST. It is expected that GST rates
would be minimum or negligible on the essential medicines.

MANASI SHAH (May20-2017) “Impact analysis of GST on Indian Hospitality

Industry” concluded that The GST of 18 percent will thus lead to banquets becoming
reasonable consequently offering a huge haul to the hospitality industry. In a nutshell, the
GST is going to have a neutral impact on the Indian hospitality industry.

Agogo Mawuli (May 2014) studied, “Goods and Service Tax-An Appraisal” and found
that GST is not good for low-income countries and doesn’t make the country to develop
in higher rate. If still these countries want to implement GST then the rate of GST should
be lesser than 10% for growth.

Dr. R. Vasanthagopal (2011-April 2nd) studied, “GST in India: A Big Leap in the
Indirect Taxation System” International journal of Trade, Economics and Finance, Vol. 2,
and concluded that switching to smooth and continuous GST from current complicated
indirect tax system in India will be a positive step in thriving Indian economy. Success of
GST will lead to its acceptance by more than 130 countries in world and a new preferred
form of indirect tax system in Asia also.

GST on healthcare will make Medicare unaffordable: ASSOCHAM- TechScistudy

Wednesday, (January 25, 2017) concluded like, Under GST, the cascading effect of tax
on goods and services would be reduced. Thus, making Indian healthcare market a
seamless uniform market, demolishing fiscal barriers between the states. The inverted
duty structure which is adversely affecting the domestic manufacturers would be reduced

24
by GST, thereby resulting in reducing the cost of inputs, thus boosting the investments in
the healthcare sector. However, certain tax exemptions that reduce cost of services for
customers might be overridden with introduction of GST.

This would pose a negative impact on the healthcare sector from the consumer's point of
view.

Marksman Healthcare (June 27-2017) “Impact of GST on Indian Healthcare sector”

said the impact of GST on the healthcare segment is still indeterminate. Some industry
specialists have confidence that post implementation of this bill, customers and industry
players will be in a win-win situation. The healthcare industry would benefit from
passing of the GST bill as it would reduce the complexities and various obstacles to the
growth of business to a large extent. On the other hand, patients/consumers are going to
be burdened with the increased medicine cost.

Abu Towhid Muhammad Shaker (2013) examined the weak form EMH of the Finnish
and Swedish stock markets, using Serial Correlation, Augmented Dickey Fuller Test
and Variance ratio test. It was concluded that sample stock indices did not follow random
walk during the study period. 

Kinjal Jethwani and Sarla Achuthan (2013) tested the weak form efficiency of S&P
CNX Nifty from 1st January 1996 to 31st December 2012, using Autocorrelation,
Variance ratio test and Runs Test. The results evidenced that Indian Stock Market was
not weak or efficient during all periods of study.

Fatih Konak and Yasin Seker (2004), analyzed the weak form efficiency of Financial
Times Stock Exchange 100 (FTSE 100) for the period from January 2001 to November
2009. The presence of unit root was examined using Augmented Dickey Fuller

25
and Phillips Perron Test. GARCH (1, 1) was used to examine the market efficiency. The
results supported the weak form market efficiency of FTSE 100.

Mohammad Shafi (2014) examined the weak form efficiency in Indian

Capital Market, using the daily return of Nifty stocks. The tools used for the analysis
were Runs test and Autocorrelation test. The results revealed that Indian Capital Markets
were inefficient in the weak form.

Priyanshu Sharma and Manojsain (2015) analyzed the impact of GST implementation,
on banking sector index of Indian stock market, during before and after GST
implementation. The study concluded that there was a positive effect of GST
implementation on the banking sector.

Milandeeep Kour (2016) theoretically analyzed the difference between past indirect
taxes and GST. It was concluded that GST did play a dynamic role in the growth and
development of the country. The results of the study, by Pandey, D. K., & Jaiswal, A. K.
(2017), showed that demonetization exercised a highly negative impact on the
performance of stock markets of pharma industry.

According to YES BANK (2018-2019) India is the largest producer for generics and the
country’s Pharmaceutical Industry is currently the 3rd largest in the world in terms of volume
and ranks 14th in terms of value. As the population continues to grow, the need for better
Healthcare Services is also growing. Currently, 5 percent of the country’s GDP is expended on
the Healthcare sector. The healthcare sector is expected to touch $150 bn by end of 2017, from
$80 bn in the year 2012. The country’s healthcare industry has been growing exponentially in last
few years, and the Health Ministry targets for the development of new technologies to end the

26
year for treating diseases, such as tuberculosis and cancer. For attracting more FDI (Foreign
Direct Investment), the Government has also raised the cap.

Meenakshi Bindal (2018) tested the working mechanism of GST to evaluate the
advantages and challenges of GST and found that the GST mechanism has been designed
in such a way that it is expected to generate good amounts of revenue, for both the
Central and State Government.  

Many researchers have analyzed the impact of GST on various sectors and came up with
different conclusions. It is quite natural that when any reform is introduced by the
Government, it will lead to many consequences. The results of some of the major studies
were highlighted in the above paragraph. It is to be noted that all the earlier studies, either
at national or international level provided different views on market efficiency. Hence
that market efficiency had to be reviewed and analyzed, based on the time-to-time
information flow, which has its effects on the markets. Hence the present study attempts
to fill the gap by examining the price movements of healthcare and pharma sector indices
of BSE and NSE, which can help investors to understand the dynamics of market
movements with respect to health care companies and diversify their portfolio in health
care stocks. The results of the present study would contribute to the stock of knowledge,
which can be added to the extend literature on the theme under study.

27
 4. DATA ANALYSIS AND DATA INTERPRETATION

Question 1.

Sr.no Aware about GST Number of responses Responses in percent

1 Yes 44 97.8%

2 No 1 2.2%

Total 45 100%

Interpretation

Out of total respondents, 97.8% of total respondents are aware about GST on medicines
and other 2.2% are not aware about GST on medicines.

28
Question 2.

Sr.no Registered dealer Number of responses Responses in percent

1 Yes 40 88.9%

2 No 5 11.1%

Total 45 100%

Interpretation

Out of total respondent, 88.9% of total respondent are registered dealers under GST act
and other 11.1% are not registered under GST act.

29
Question 3.

Sr.no. Number of years Number of responses Responses in percent

1 Less than 5 years 18 40%

2 5 to 10 years 5 11.1%

3 More than 10 years 22 48.9%

Total 45 100%

Interpretation

Out of total respondent, 40% of total respondent have their medical stores more than 10
years, 11.1% have their medical stores from 5 to 10 years and 48.9% have their medical
stores more than 10 years.

30
Question 4.

Sr.no. Tax slab rate Number of responses Responses in percent

1 5% 0 0

2 12% 30 66.7%

3 18% 15 33.3%

4 28% 0 0

Total 45 100%

31
Interpretation

Out of total respondent, 66.7% of total respondent have choose 12% of tax slab rate,
33.3% have choose 18% of tax slab rate and none of them have choose 5% and 28% of
tax slab rate.

Question 5.

Sr.no. Effects of GST Number of responses Responses in percent

1 Progressive 5 11.1%

2 Neutral 32 71.1%

4 Regressive 8 17.8%

Total 45 100%

32
Interpretation

Out of total respondent, 11.1% of total respondent have progressive effects of GST on
medical stores, 71.1% have neutral effects of GST on medical stores and 17.8% have
regressive effects of GST on medical stores.

Question 6.

Sr.no. Response on Decision by Number of responses Responses in percent

Government

1 Yes 21 46.7%

2 No 7 15.6%

3 Maybe 17 37.8%

Total 45 100%

33
Interpretation

Out of total respondents, 46.7% have agreed on applying GST on medicines was right
decision by government, 15.6% have disagreed on applying GST on medicines was right
decision by government and 37.8% have neither agreed nor disagreed on applying GST
on medicines was right decision by government.

Question 7.

Sr.no Effects of GST on Number of responses Responses in percent

MRP

1 Highly 8 17.8%

2 No effects 15 33.3%

3 Slightly 22 48.9%

Total 45 100%

34
Interpretation

Out of total respondent, 17.8% of total respondent have choose highly effects of GST on
MRP of medicines, 33.3% have choose no effects of GST on MRP of medicines and
48.9% have choose slightly effects of GST on MRP of medicines.

Question 8.

Sr.no Time slot of paying GST Number of responses Responses in percent

1 Monthly 17 37.8%

2 Yearly 3 6.7%

3 Quarterly 25 55.6%

35
 Total 45 100%

Interpretation

Out of total respondent, 37.8% of total respondent pay GST monthly, 6.7% of them pay
GST yearly and remaining 55.6% of respondent pay GST quarterly.

Question 9.

Sr.no Response to Previous tax Number of responses Responses in percent

system

1 Yes 28 37.8%

36
 2 No 17 62.2%

Total 45 100%

Interpretation

Out of total respondent, 37.8% of total respondent have choose previous tax system as
more favorable and 62.2% of them have chose previous tax system as less favorable.

Question 10.

Sr.no Acceptance of GST Number of responses Responses in percent

37
 1 Positively 24 53.3%

2 Neutral 17 37.8%

3 Negatively 4 8.9%

Total 45 100%

Interpretation

Out of total respondents, 53.3% of total respondent have accepted the new tax reforms
positively, 37.8% of them have accepted the new tax reforms in neutral way and
remaining 8.9% of them have accepted the new tax reforms negatively.

Question 11.

38
 Sr.no Segment of drugs Number of responses Responses in percent
effected

1 Generic 1 2.2%

2 Prescribe drugs 35 77.8%

3 Others 9 20%

Total 45 100%

Interpretation

Out of total respondents, only 2.2% of the respondent has choose generic segment of
drugs as most affected due to GST, 77.8% of them have choose prescribed drugs of
segment as most affected due to GST and reaming 20% have choose other segment of
drugs as most affected due to GST.

39
Question 12.

Sr.no Tax system choice Number of responses Responses in percent

1 Previous tax system 14 31.3%

2 GST 31 68.9%

Total 45 100%

Interpretation

Out of total respondent, 31.1% of the respondent have choose previous tax system i.e.
sales tax, vat, etc and remaining 68.9% of them have choose GST i.e. goods and service
tax.

40
Question 13.

Sr.no. Effect on sales due to GST Number of responses Responses in percent

1 Increase 4 8.9%

2 No effect 32 71.1%

3 Decrease 9 20%

Total 45 100%

Interpretation

Out of total respondent, 8.9% of the respondent have experienced increase in frequency
of sales due to GST, 71.1% of them have experienced no effect on frequency of sales due
to GST and remaining 20% have experienced decrease in frequency of sales.

41
Question 14.

Sr.no. GST Benefits after filing Number of responses Responses in percent

return

1 Yes 26 57.8%

2 No 19 42.2%

Total 45 100%

Interpretation

Out of total respondents, 57.8% get GST benefits after filing return and remaining 42.2%
do not get any benefits after filing return.

42
Question 15.

Sr.no. Other benefits from Number of responses Responses in percent

government

1 Yes 9 20%

2 No 36 80%

Total 45 100%

Interpretation

43
Out of total respondents, 20% of the respondent gets other benefits from government and
remaining 80% of them do not get any other benefits from government.

5. CONCLUSION AND SUGGESTIONS

5.1 Findings
The respondents were the owners of medical stores. Almost all were dealing in retail
business. Few of the business owners were dealing in wholesale business as well. The tax
slab in which generic medicines come is 12%, prescribe medicines and other allopathic
medicines come under 18% and few of the ayurvedic medicines fall under cosmetic
products and therefore come under slab of 18%. The sales of medicines has not affected
that much since there are many people in the world who survive on medicines. People
suffering from severe diseases have no choice apart from having medicines. The most
affected segment of drugs due to GST is prescribed drugs. The MRP of medicines has
also changed slightly. While survey, I also found out that there are many business owners
who have yet not accepted GS while others have accepted GST and also get benefits of
GST after filing return.

5.2 Suggestion
The respondents’ suggestions are mixture of positive and negative thoughts. Few of the
respondents have accepted GST positively and others are not happy about the new tax
reforms. Respondents also think that the procedure is too time consuming and sometimes
it is also a troublesome. The procedure should be simplified which will promote tax payer
to accept GST reforms positively.

44
The rate of tax should be reduced on medicines as price of the medicines hike and
everyone cannot afford them. The profit margin for retailers is less and for manufacturing
company i.e. phama industries have no change in their profit margin. There are many
people who still don’t know about the benefits they get after filing return. There are few
dealers who haven’t yet registered under GST Act as they are not aware about the
procedure and benefits of GST. Along with pros there are also come cons of GST
applicable on medicines.

5.3 Conclusion
Although through the various points mentioned above GST has both the positive as well
as negative effect on pharmaceutical businesses. But the quantum of positive impact is
more and government is still working towards the changes to reduce the negative effect
and such activity is an ongoing process for the further improvement. Lack of proper
knowledge, training an infrastructure need for the implementation of GST was also a
hindrance in the smooth implementation of GST but it is now becoming easier and more
adaptable.

There is still an uncertainty whether the lifesaving drugs, medicines, healthcare services
etc. would continue to be tax-free. There are different taxes in the very state of different
types of drugs that will be changed now as the GST has already in practice. GST is
applicable on all the stages of the supply chains. One of the prime concerns of the
Pharma and healthcare industry is their inverted duty structure. The cost of input is much
higher than the output. If this gets changed then this would prove to be the biggest
benefits of the implementation of GST.

Though the impact of GST on the healthcare and Pharma industry is still
indeterminate, overall it is a win-win situation for the Pharma Industry. So, if you were
looking for the ways how GST will impact the Pharmaceutical industry then I hope this

45
might have been helpful for you. If you are involved in the Pharma sector then it is
important for you to know the basic effects of GST.

BIBLIOGRAPHY

● GST and Its impact on Pharmaceutical Industry www.researchgate.net

GST and Its impact on Pharmaceutical Industry journal.iujharkhand.edu.in
www.paisabazaar.com
● http://www.dypatil.edu/schools/management/wp-content/uploads/2015/05
Shashank-Dhond.pdfwww.dypatil.edu
● What Is The Impact Of GST On The Well Known Medical Store In Kolkata
www.frankrosspharmacy.com
● www.elkjournals.com
● http://www.indusedu.org/pdfs/IJRMEC/IJRMEC_1555_89657
www.elkjournals.com
● http://www.iosrjournals.org/iosrjbm/papers/Conf.18012018/Volume
%202/15.%2056-60.pdfwww.iosrjournals.orgliterature review on impact of gst on
medical stores Google Searchwww.google.com
● www.google.com
● https//:taxguru.in

46
 ANNEXURE

⮚ Name of medical store

⮚ Name of owner

⮚ Are you aware about GST applicable of medicines?

o Yes
o No

⮚ Are you Registered dealer under GST act?

o Yes
o No

⮚ How long it's been to your medical store?

o Less than 5 years
o 5 to 10 years
o More than 10 years

⮚ What is tax slab rate for retailers?

o 5%
47
o 12%
o 18%
o 28%

⮚ How is GST affecting medical store?

o Regressive
o Neutral
o Progressive

⮚ Do you think applying GST on medicine was right decision by Government?

o Yes
o No

⮚ Has GST affected the MRP of medicines?

o Highly
o No effect
o Slightly

⮚ What is the time slot of paying GST?

o Monthly
o Yearly
o Quarterly

⮚ Was previous tax system more favorable?

o Yes
o No

⮚ How have you accept the new tax reforms?

o Positively
o Neutral

48
o Negatively

⮚ Which segment of drugs has mostly affected by GST as per you?

o Generic
o Prescribe drugs
o Others

⮚ If you get to choose between taxation system what would you choose?
o Previous Taxation System
o GST

⮚ Why would you choose above mentioned system?

⮚ How is frequency of sales affected due to GST?

o Increase
o Decrease
o No effect
 
⮚ Do you get GST benefits after filing returns?
o Yes
o No
 
⮚ Do you get any other benefits from Government?
o Yes
o No

⮚ What is your review on GST implementation?

49