DGGI Initiates Investigations into Pharma Companies for Fake GST ITC and Non-payment Under RCM

Directorate General of GST Intelligence (DGGI) in another drive to curb the GST leakages in distinct sectors learned about enrolling 41 cases against the pharma majors in the country in FY24.

DGGI said that pharma companies have evaded GST on account of brand transfer sales availing the bogus ITC on expired drugs, taking fake GST ITC for business support services, and non-payment of tax under the Reverse Charge Mechanism.

Pharma companies in the previous financial year have filed nearly Rs 450 cr post being served pre-show cause notices, and further investigations are still in process.

As per the information, the Directorate General of GST Intelligence (DGGI) Mumbai zone emerged with the most number of cases with nearly 29 of the total 41 sales.

Sources stated that the list, Glenmark Pharmaceuticals paid the highest amount of GST due, spread over two cases—approximately ₹130 crore and ₹40 crore—followed by Vicco Laboratories, again in two separate cases, one of about ₹95 crore and the other of about ₹20 crores. Third on the list is Zydus Healthcare and Zydus Lifesciences, which paid approximately ₹45 crore and ₹12 crore.

The other registered companies were, and who are part of the 41, include Sun Pharma Laboratories Ltd, Sun Pharma Ltd, Biocon Ltd, Pfizer Ltd, Biocon Biologics, Wockhardt Ltd, Torrent Pharmaceuticals Ltd, Aurobindo Pharma Ltd, Cipla Ltd, Hetero Healthcare, Mylan Pharmaceuticals, Alembic Pharmaceuticals, Lupin Ltd, etc.

Biocon the pharma company cited that DGGI Mumbai has informed about specific classifications of sales promotional expenses as not being eligible for GST credits. Biocon and Biocon Biologics have reversed the respective GST credits claimed by them under this lead. Under this category, the GST credit amount adjusted is for the period FY 2017-18 to FY 2022-23. No GST evasion is there by the company. We are committed to the norms and the highest standards of corporate governance.

Alembic Pharma said we are being provided with the summons to clarify the points and provide the information. The problem is related to the statute interpretation on the admissibility of input credit on particular routine operational business practices. GST department poses distinct opinions. There was a reversal of ITC credit from our available credits. No further queries or Show Cause Notice (SCN) were there subsequently. To elaborate no case was registered against us in the same regard.