The upcoming goods and services tax has created a lot of puzzle in various sectors as the tax rules and implications will be changed and the effect will take some time to settle down. The medicine industry is also taking some setback just to ascertain the real impact of the GST on the business and has been holding stocks for avoiding the chances of losses in case of any sudden rate change.
This decision has also led the patients and health deprived individuals into depression as the medicine stockist are holding a lesser amount of drugs in order to prevent any circumstantial loss after the GST. The stockist and trade chains of medicine are totally confused and uncertain about the possible outcomes of the approaching goods and services tax. For which the concerned sector outlets are pinning down the stock in the trading.
A reluctant mismatch between tax payouts and tax refunds is making the stock and trade channels to reduce the inventory as it is thought that it might prove a loss in case of maintaining a bigger volume of the stock. The stockist has also started to return the already placed stock to the companies which may lead to a short period of imbalance among the supply and demand chain.
The industry experts are asking for the relaxed state from the stockists and has said that there is no need for panic. GlaxoSmithKline Pharmaceuticals vice-president (South Asia) and managing director A Vaidheesh mentioned that “De-stocking is a natural fallout of the exercise so as to minimize the unnecessary impact (due to GST implementation). Lower stocks could be maintained, just enough to serve market demand.”
Various social media platforms are filled with alarming messages to concern about the reducing stock size of the medicines and also asked the patients and health deprived individuals to stock necessary medicines in case of heavy shortage which might be plunged from July.
Ameesh Masurekar, a director at AIOCD ( All Indian Origin Chemists & Distributors Ltd) AWACS which occupies a hefty 60 thousand distributors under its certification and a total of seven lakh chemists which are under its guide, mentioned in an interview that, “Distributors usually keep an inventory for 40 days, while at the retail level it’s 10 days. In case the GST rate is unfavorable, distributors in the last week of June may reduce inventory (stocks) to 15 days, but it is unlikely to have an impact at the retail level.”
He also mentioned that there is no issues of inventory and the stocks and inventory concerned will be regularized from July first week with a normal inventory level to suffice the health deprived community. Indian Pharmaceutical Alliance secretary general D G Shah specified that “As a part of the transition, and in the absence of clarity about credit for duty-paid stock on hand, all manufacturers and traders in many sectors are trying to reduce stock in trade. That is transitory and should not create a major shortage.”
Even distributors are under stress after memorizing the incidents of losses which the dealers had to suffer in the case of value-added tax (VAT) implementation by the delay in tax refund dues. Industry experts cleared that this time the dealers would be playing safe and will recognize some course of action like minimizing the stocks after which they can assess the tax refunds due on their side and will re-stock after the issue has been cleared.
Sujay Shetty of PricewaterhouseCoopers ( PwC) assured the uncertainties currently hoarding over the industry and clarified that “GST modalities and rules are still to be clarified, particularly in tax refunds and input credits. Uncertainty in the industry will dissipate once the rules are clarified.”
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The best way to secure the trade and to avoid possible losses in the transition, the industrial players must seek an organized way of implementing GST into their structure. The whole ecosystem, including IT, support, vendors, packaging and all the related chain must be fitted with the latest tool to tackle the transformation of GST.
