Proposals for Goods and Services (GST) rate cuts on Active Pharmaceutical Ingredients (APIs) in consonance with pharma formulations have been put forth by Industry body Confederation of Indian Industries (CII).
Additionally, the demands for exempting all goods obtained by drug manufacturers for research and development from GST has also been made by CII in its Pre-Budget Memorandum. At present, such goods attract 5% GST and only a few specified ones are tax-free.
These proposals are made for the Union Budget 2020 
New discussions will take place by the Central and State government to fiddle with the goods and services tax (GST) after the presentation of Union Budget that is going to be presented by Finance Minister Nirmala Sitharaman in Parliament on February 1 for the fiscal year 2020-21.
CII is demanding a reduction in GST rate on API according to Pharma formulations because differences in GST rates have resulted in the aggregation of Input Tax Credit and this can be rectified by equalizing GST rates on the two.
The industry body expressed, “Pharma formulations attract GST of 12 percent whereas inputs active pharmaceutical ingredients (API) have GST of 18 percent which has led to the accumulation of Input Tax Credit. This situation needs to be corrected by reducing GST on API to 12 percent.”
Basic chemical form, which attracts18% GST, are converted into Pharmaceuticals – medical dosages that are suitable for patients, which attracts 12% GST. The difference in the GST rate applicable 
Grab the information of revised GST slab rates on consumer products in India, Although GST council finalized the slab rates like 5%, 12%, 18% and 28% to raw materials and finished goods has led to the amassment of ITC.
CII explained, “Pharmaceuticals are medicinally effective chemicals converted to dosage form to make it suitable for patients. In its basic chemical form, pharmaceuticals are bulk drugs and when converted in final dosage these are formulations.”
Further, the importance of the pharmaceutical industry and the distribution of quality medicines was also underlined by the industry in pre-Budget Memorandum. It reads, “The indigenous pharmaceutical industry has been playing a crucial role in the social well-being of the country not only by discovering, developing and manufacturing but also by distributing quality medicines,”.
Behesting for discharging GST and customs duty from items procured by the drug manufacturers for R&D purposes, the industry body stated, “Partial exemptions are provided for specified items which are Imported or domestically procured by the R&D units registered under Department of Scientific and Industrial Research (DSIR).”
“The exemption is granted over and above 5 percent on such procurement but only on specified items. In case the items purchased are not in the specified list, full duty/tax has to be paid. This has increased the cost of R&D activities and resulted in a huge accumulation of GST input tax credits 
A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India,” it added.
