NPPA asks drug firms to cut prices in wake of GST rate reduction

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TaxClue Team
TaxClue Team
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

Drug pricing regulator NPPA has asked pharmaceutical companies and medical device makers to reduce prices on products on which the GST has been lowered in order to pass on the benefit to the consumers.

In a notification, the National Pharmaceutical Pricing Authority (NPPA) noted that a change in tax rates has an impact on the fixation of maximum retail prices (MRP) of various drugs and formulations.

As per DPCO 2013, MRP of drugs and formulations are inclusive of taxes. Therefore, any downward change in tax or GST rates should be reflected in the MRP and benefit of the reduction should be passed on to the consumers, it noted.

“In view of the above, all the manufacturers and marketing companies are required to revise the MRPs of drugs/formulations on which tax/GST rates have been reduced taking into effect the revised GST rates,” NPPA said.

Recalling or re-labelling or re-stickering on the label of the container or pack of the already released stocks in the market is not mandatory if manufacturers are able to ensure price compliance at the retailer level through issuance of a revised price list, it noted.

The NPPA is mandated to fix and revise the prices of controlled bulk drugs and formulations, and to enforce prices and availability of the medicines in the country. It also monitors the prices of de-controlled drugs in order to keep them at reasonable levels.

The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state ministers, on June 12 slashed tax rates on COVID-19 drugs such as remdesivir and tocilizumab as well as on medical oxygen, oxygen concentrators and other COVID-19 essentials.

The finance ministry’s revenue department on June 14 notified the lower rates for 18 COVID-related supplies, like hand sanitiser, pulse oximeters, BiPAP machine, testing kits, ambulances and temperature check equipment.

These concessional rates would be applicable till September 30, 2021. The Council in its June 12 meeting decided to reduce GST on COVID-19 drug tocilizumab and black fungus medicine Amphotericin B to ‘nil’, from 5 percent.

The rate of Remdesivir and anti-coagulants like heparin was lowered from 12 percent to 5 percent. The Council also decided to cut the GST rate on ambulances to 12 percent from 28 percent.

Tax on medical-grade oxygen, oxygen concentrators (including personal imports), ventilators, BiPAP machines, and high-flow nasal cannula (HFNC) devices has been reduced to 5 percent from 12 percent.

Also, tax on COVID-19 testing kits and pulse oximeters (including personal imports) has been brought down to 5 percent from 12 percent. Hand sanitisers, temperature check equipment, gas/electric furnaces for crematoriums will also attract a lower 5 percent tax, from 18 percent earlier.

On Tuesday, the finance ministry notified the concessional rate of GST that will be applicable on COVID-19 relief materials till September 30, 2021.

Also, a lower goods and services tax (GST) of 5 percent is now applicable for work contracts for construction, repair or maintenance of electric furnaces meant for funeral, burial or cremation of the deceased. The earlier tax rate of this service stood at 12 percent.

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