Many drug makers are worried that they may end up paying goods and services tax (GST) on medicines on which they have already paid earlier taxes like excise and sales tax.
Under the current law, pharmaceutical companies that have stock lying with them that is older than 12 months are not entitled to a set off against GST liability. This means they will have to pay GST on all stocks after June 30, 2018, whether excise and sales tax have already been paid on them or not.
Industry trackers said all states have separate C forms. A dealer purchaser issues C form to a seller at the time of an interstate purchase so that it attracts low sales tax.
“So we are told that we can claim transition credit only if we clear the C form liabilities,” the pharma company head said. “We are bearing the burden because we are financially secure, but the liabilities that have to be cleared runs in crores and would differ for every company.”
Industry trackers said that in some cases pharma companies don’t have corresponding invoices of goods they purchased from their vendors. Before GST, there was no invoice matching, which lead to a situation where vendors were not required to give precise invoices, say experts.
This is however changing post GST. EThad on June 30 reported that pharma companies have been telling their vendors that until they are GST-compliant they won’t be paid. Some pharma companies have communicated this recently in writing and said they could even alter written contracts.