New Delhi: The pharmaceutical and medical technology (medtech) industries are worried about the upcoming changes in Goods and Services Tax (GST). They believe these changes may increase their working costs, create cash flow problems, and slow down business growth.
Why Pharma and Medtech Companies Are Concerned
Both pharma and medtech companies are already dealing with higher raw material prices and strict government rules. If GST rates increase further, the cost of medicines, equipment, and consumables will also rise. This will not only put pressure on companies but also make healthcare more expensive for patients.
Industry expert Rajiv Nath has suggested that GST on medical equipment and consumables should be balanced. He explained that both categories should not be taxed the same way, otherwise, patients will have to bear the extra cost, and hospitals may find it harder to adopt advanced technologies.
The Problem of Inverted Duty
Another issue troubling the industry is the inverted duty structure. This happens when raw materials are taxed at a higher rate than finished medicines. The Federation of Pharma Entrepreneurs (FOPE) has requested the government to reduce GST on Active Pharmaceutical Ingredients (APIs). Doing so will help Indian manufacturers lower costs, reduce import dependency, and strengthen local production.
If the structure is not fixed, pharma companies will face blocked funds and higher costs of production. This will make it harder for them to compete in the international market.
MSMEs May Struggle the Most
Big companies may still find ways to manage these costs, but MSMEs (Micro, Small, and Medium Enterprises) will be the worst affected. Many small pharma businesses already work with limited budgets. If GST refunds are delayed or blocked, they may face a shortage of money to run their operations.
For MSMEs, this means slower growth, reduced innovation, and difficulty in maintaining supply chains. Since small businesses form a large part of India’s healthcare system, their slowdown could affect the supply of essential medicines in the market.
Impact on Pharma Supply Chains
Pharmaceutical supply chains involve raw material suppliers, manufacturers, and distributors. If GST costs increase at any level, the entire chain will be affected. For example, when APIs are taxed more than finished drugs, local manufacturing becomes less attractive, and companies may rely more on imports.
This will also create challenges for businesses working with a pharma contract manufacturing company. Such companies already operate with low profit margins, and any increase in tax-related costs will make it difficult for them to continue operations smoothly.
Effect on Monopoly Pharma Business
The changes in GST may also impact opportunities for entrepreneurs working with a monopoly medicine company in India. In a monopoly model, distributors and franchise partners enjoy exclusive rights to sell products in their region. This usually ensures good profit margins and steady growth.
However, if GST on medicines and consumables increases, it will reduce the overall profit for franchise owners. This could also make medicines more expensive for customers, especially in rural and semi-urban areas where affordability is already an issue.
What the Industry Wants
Pharma and medtech companies are requesting the government to take corrective steps before finalizing the GST reforms. Their main demands include:
-
Lower GST on APIs – to encourage local production.
-
Different GST slabs for medical consumables and equipment – to keep healthcare affordable.
-
Faster GST refunds for MSMEs – to reduce cash flow problems.
-
Simplified tax process – so smaller companies don’t spend too much on compliance.
If these steps are taken, companies will be able to manage costs better, and patients will benefit from more affordable healthcare.
The Road Ahead
India’s pharma industry is known worldwide for producing affordable generic medicines, while the medtech sector is growing quickly with modern diagnostic and treatment tools. But without a fair GST policy, both industries could face slower growth.
A balanced GST system will not only help big companies but also protect MSMEs, distributors, and franchise owners. Most importantly, it will ensure that medicines and medical devices remain affordable and accessible for the people who need them the most.
Conclusion
The planned GST changes have raised serious concerns in both the pharma and medtech industries. While the goal of the government is to improve the tax system, these changes might create new challenges by increasing costs and blocking working capital.
If the government reduces GST on APIs, provides faster refunds, and creates separate rates for consumables and equipment, it will protect the industry from financial strain. These steps will help small and big businesses grow together while keeping healthcare affordable for every Indian.