Inventories enough, medicine shortages unlikely
MUMBAI: Consumers fearing shortage of medicines can breathe a sigh of relief as inventories with distributors and retailers one week before the implementation of the Goods and Services Tax (GST) in the country are sufficient to meet demand. The GST will come into effect from 1 July.
Although there has been a reduction in inventories since May-end as distributors and retailers tried to minimise losses due to change in tax structure, the current stock holding is adequate, according to All India Organisation of Chemists and Druggists (AIOCD). “With one week to go for GST and more than three weeks of inventory at distributor level, plus retail inventory of 2-3 weeks, the pharmaceutical industry is in a positive situation and we can positively affirm that there will be no consumer shortages,” AIOCD said in its June 23 report.
As of June 21, distributors on an average had 22 days of inventories, compared with 24 days on June 14, 27 days on June 7 and 40 days on May 31, as per AIOCD data.
Inventory holding days for medicines for diabetes, gastrointestinal diseases and cardiac ailments were lower than the average of 22 days. However, retailers had encouraged consumers to buy medicines for such chronic diseases in advance to offload their stock.
Under the GST regime, most medicines will be taxed at 12%, while essential drugs including insulin will be taxed at 5%. While a marginal increase in tax burden is likely because of GST, the bigger concern has been the transition to the new tax system, especially regarding inventories held on June 30.
On the pre-GST stock, distributors can avail 100% credit on Cenvat if they possess a central excise invoice issued by the manufacturer, importer, super-stockists or carrying and forwarding (C&F) agents. In case, they do not have an excise invoice, then credit can be availed only on 40% of the central GST.
Currently, warehouses, depots, super-stockists and C&F agents of many manufacturing firms are not registered under central excise; so their distributors will not be eligible to claim 100% credit of excise duty on pre-GST stock. This will mean some financial loss for distributors and therefore they are reducing the inventories, said a Mumbai-based pharma products distributor.