Introduction

The Indian pharmaceutical industry or Drugs and Pharmaecituals Industry is one of the leading industries globally as it is the principal supplier of generic drugs all over the world. Almost 80% of all AIDS  drug is produced by India. For all the developing nations, The UN provided licenses to six Indian pharmaceutical labs to make generic anti-AIDS medicine. 20% of all the generic drugs used around the world is manufactured by Indian Pharmaceutical companies.

GST came as the game changer as it is leaving its impact on all the existing sectors in India. Under GST, Finished medicines come under the 12% slab and the pharmaceutical industry is worried that transition troubles may be around the corner if government does not act soon enough to tackle them.

In order to learn about the changes GST brought with itself, go through the following questions:

(1)  What are the requirements for clearance of physician samples distributed free of cost?

In such cases, ITC availed on the said samples has to be reversed in view of the provisions CGST Act, 2017. You don’t have to pay any tax on clearance of physician samples distributed free of cost as the value of supply is zero. No credit has been availed.

(2)  What is the procedure for movement of time expired medicines from the retail outlets to the manufacturer for destruction?

For the above, a credit note has to be issued by the manufacturer within the time specified in CGST Act,2017 subject to the condition that the person returning the expired medicines reduces his ITC. Goods are destroyed once the time expired. The manufacturer has to reverse his ITC on account of goods being destroyed. The registered person returning the goods shall issue a tax invoice if the goods are returned after the specified time limit.

(3)  How loan and licensee units carry out their operations in GST regime?

There is no special provision for loan and licensee units in GST law. These units have an option to follow the procedure. The principal can send any inputs etc. to such units without payment of tax. The principal can clear the goods from the premises of such units if the principal declares these units as his/her additional place or where units are themselves registered.

(4)  What is the treatment of clearances effected to Special Economic Zones?

The clearance effected to the Special Economic Zones are ZERO rated supplies. According to the IGST Act,2017, the supplier can claim refund of IGST paid on such supplies or clear the same under bond/letter of undertaking and claim refund of the unutilized ITC.

(5)   Whether Special unit Zones(SEZ) located in a State requires a separate registration under GST?

Separate registration is required to be obtained for the unit located in SEZ as the SEZ unit located in a state is treated as a business vertical distinct from other units located in the state outside the SEZ.

(6)  Whether Input Service Distributor (ISD) registration is required to be obtained separately?

Yes ! Every person being an Input Service Distributor has to make a separate application for registration.

(7)   What is the transitional credit that can be availed on the existing stocks held by a registered person under GST, who was not required to be registered under the existing law?

For a registered person who was not registered under the existing law and who is not in possession of any document
evidencing payment of central excise duty in respect of the goods held in stock shall be allowed credit at the rate of 60% on such goods which attract central tax at the rate of 90% or more and 40% for the other goods of the central tax applicable on supply of such goods. The said amount shall be credited in the electronic credit ledger after the central tax payable on such supply has been paid. The amount ITC would be at the rate of 30% and 20% respectively of integrated tax in case where integrated tax is paid. From the appointed day the facility will be available for maximum period of 6 months or till the goods are sold out, whichever is earlier.

(8)  Whether a manufacturer can avail deemed credit in respect of transitional stocks on the appointed day in respect of the stocks for which duty paying document is not available?

The manufacturer is not eligible to avail deemed credit in respect of transitional stocks, for which duty paying document is not available. Such credit is not available in case of SGST except where VAT was payable on the basis of MRP.

(9)  Whether deemed credit is available in respect of goods purchased from tax-free zones?

The deemed credit would be available in respect of the goods, which are not unconditionally exempt from the whole of the duty of excise or were not nil rated. The goods which are purchased from tax free zones are exempted from duty payment and not nil rated. The deemed credit would be available in respect of such goods held in stock on the appointed day.

(10)  What is the obligation cast on the Registered Person in case of purchases from Unregistered Person?

The registered person who is procuring the taxable supplies from an Unregistered Supplier has to raise invoice and pay GST on Reverse Charge basis in respect of such supplies.

(11)  What is the treatment of supplies made from erstwhile tax-free zones?

In GST there is seamless transfer of ITC credit. No exemptions are accorded to supplies made by erstwhile tax-free zones. The goods cleared from erstwhile tax-free zones would be subjected to GST from the appointed day i.e. 1st July ,2017

(12)  What is the effect of non-payment of consideration in respect of taxable supplies received by the recipient?

If the recipient fails to do the above within a period of 180 days from the date of issue of invoice by the supplier then the amount of input tax credit availed proportionate to the amount of consideration not paid would be added to his output tax liability along with interest thereon. You can reclaim the ITC which was reversed by the recipient after payment of consideration along with the tax payable thereon subsequently. For deemed supplies, this provision is not applicable made without consideration.

(13)  Whether separate sequence numbers can be maintained for invoices issued by the Registered Person in respect of supplies made under GST?

The registered person can raise single or multiple series of invoices for the supplies made under GST as long as such invoice numbers are unique for a financial year.

(14)  Which is the document required to be issued by the Registered Person for supply of goods from one premises to other premises under the same registration number?

Under the cover of a delivery challan along with any other document that may be prescribed in lieu of the e-way bill for such movements.

(15)  Whether discounts can be claimed as an abatement from the price for assessing GST?

The value of supply for charging GST shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply. The value of supply shall also not include any discount which is given after the supply has been effected if such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices and ITC attributable to such discount has been reversed by the recipient of the supply.

Conclusion

In case you are confused about GST as a business owner, feel free to consult the GST experts at Legal Raasta. You can get comprehensive assistance on GST Registration and GST Return Filing. You can also use our GST software for doing end-to-end GST compliance.