Delhi chemists want 3-month window to clear pharma stock after GST cut

Pharma GST

Pharmaceutical retailers in Delhi have demanded a three-month “transitional window” to clear inventory, saying the goods and services tax (GST) cut on medicines will inflict heavy losses and also disrupt the supply chain.

The Retail Distribution Chemist Alliance (RDCA) has sought immediate relief measures after GST on medicines was reduced to 5 percent from 12 percent as part of a larger overhaul of the indirect regime, which did away with 12 and 28 percent slabs.

The new rate, effective September 22, has created an inventory crisis for pharmacies holding stock purchased at the higher rate.

In a letter to Delhi chief minister Rekha Gupta, the alliance detailed the "immediate financial stress" facing its members.

Chemists are caught with higher-cost inventory, as the Maximum Retail Price (MRP) includes the pre-paid 12 percent GST. They will now be expected to sell these products at a lower price reflecting the new 5 percent rate, forcing them to absorb the 7 percentage point differential as a direct loss.

"These timely relief measures will protect the pharma trade and ensure uninterrupted patient care in Delhi," RDCA president Sandeep Nangia wrote in the letter dated September 6, three days after the changes were announced by the GST council.

Moneycontrol has seen a copy of the letter.

Beyond the three-month grace period to sell old stock, RDCA has also demanded a "clear mechanism for adjustment of GST input within six months”. This would allow retailers to formally reclaim the excess tax paid on any remaining unsold goods, a critical step to prevent lasting financial damage.

The situation highlights a challenge in policy implementation. While the government's tax cut is a welcome move aimed at reducing healthcare costs for consumers, it has placed the financial burden of the transition on retailers, who are now awaiting a response to prevent a squeeze on their operations.

On September 3, the GST council slashed GST on medicines from 12 percent to 5 percent, a move the government said would make healthcare more affordable.