1. Impact of GST on Pharmaceutical sector
By:
CMA SUKRUT MEHTA
Kirit Mehta & COMPANY
Cost Accountants

2. GST Introduction GST is a destination based Tax
Multi Stage Mechanism shifts the tax incidence near to the consumer
Largely technology driven
Exports will be zero-rated in entirety
Tax on Supply of Goods & Services – concept of sale, manufacture not relevant
Plethora of indirect taxes to be subsumed
Harmonization between Center and State Tax regimes
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3. GST Introduction – Taxes to be subsumed
CENTRAL TAXES
STATE TAXES
Central Excise duty
Additional duties of excise
Excise duty levied under Medicinal & Toilet Preparation Act
Additional duties of customs (CVD & SAD)
Service Tax
Surcharges & Cesses
State VAT / Sales Tax
Central Sales Tax
Entertainment tax
Luxury tax
Entry tax
Taxes on lottery, betting & gambling
Cesses & surcharges
Purchase Tax
KIRIT MEHTA AND COMPANY - COST ACCOUNTANTS

4. GST INTRODUCTION – WAY FORWARD
SGST law to be passed by the State Legislatures
GST Council to fit tax rates to various categories of Goods or Services
Sector Wise guidance notes to be prepared
Migration and handholding of existing tax payers
Outreach program for trade and industry
Change Management
KIRIT MEHTA AND COMPANY - COST ACCOUNTANTS

5. Expected Reduction in Price of Goods
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6. Types of Supply Chain Setups
Manufacturer
Manufacturer & Marketing
Manufacturer, P2P & Marketing
Importer
Importer & Marketing
Manufacturer & Distributor
Manufacturer & Govt Supply
Manufacturer & Institutional Seller
KIRIT MEHTA AND COMPANY - COST ACCOUNTANTS

7. Channel of Distribution SBU BASED MARKETING SETUPS
Manufacturer to Super Stockist
Super Stockist to Wholesalers
Wholesalers to Retailers
Retailers to Consumers
Wholesalers / Company to Institutions
SBU BASED MARKETING SETUPS
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8. Channel of Production / Procurement
Produced by manufacturer’s factory in original location
Manufactured at company’s factory in hilly states
Loan Licensed to other manufacturer
Principal to Principal manufacturing
Intermediate Production in one location and final products at another
Outsourcing of a part of the manufacturing process
Repacking / Relabeling for Bulk Exports
Import of Formulations for sale
KIRIT MEHTA AND COMPANY - COST ACCOUNTANTS

9. Implications of GST
Excise and IT benefits outweigh incremental freight - Rush for new capacities in fiscal benefit areas
CST costlier than additional freight and establishment expenses of CFAs
CFA in every large State
Catchment area of CFAs delimited by State boundaries
Catchment area of distributors also delimited by State boundaries
Concept of State boundaries disappears especially for distributors
Complete overhaul of Regional Warehouses and CFA locations
Based on TDC
Less number of CFAs (20-23)
Catchment area of CFAs will be distance-based, independent of State boundaries
KIRIT MEHTA AND COMPANY - COST ACCOUNTANTS

10. Implications of GST Shorter routes from factories to distributors
Direct deliveries
Lower stock-in-transit
Lesser Transport Costs due to lower part load deliveries
Faster clearance at State check points - No need to check for tax revenue leakage
Lower freight cost on raw materials and finished goods
Lower inventory in the system
Lower manufacturing cost due to scale efficiencies
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11. Expected Impact Pharma Pricing
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12. KIRIT Mehta & Company Cost Accountants
THANK YOU
KIRIT Mehta & Company
Cost Accountants
KIRIT MEHTA & ASSOCIATES
COST ACCOUNTANTS
KIRIT MEHTA AND COMPANY - COST ACCOUNTANTS