GST Impact- Gujarat set to regain its foothold in Pharma Sector

Gujarat which till 2008, had about 40% of its share in Country’s Pharma Industry, saw its share in the industry tanking to low of 20% due to exodus of the units to Hill States where the tax benefits in form of Sales Tax Exemption and Excise duty exemption were extended.

Now, the tax benefits are nearing the end and the production units are facing the heat due to local issues such as power issues, lack of talented manpower, being forced to hire manpower under pressure from local bodies, exorbitant rates of transportation, loading and unloading by transport unions, the state regained some of its lost share and now claims 28% of its national share in the pharma industry.

Existing Units not likely to expand capacity in hill states- While it may not be easy for the units now established in hill states, pharma industry is not keen on expanding its capacity there due to operational problems.

GST set to ensure uniform tax impact on prices across country- Now with GST as the tax structure is set to get uniform across various states in the country, many units are planning to come back to Gujarat or other native states of the promoters. Gujarat has ample power supply for industrial units, skilled manpower and good infrastructure to support the industry and with GST as the disparity in the tax rates comes to an end, it is all set to regain its lost glory.

GST- Tax methodology at transaction level instead of on Maximum Retail Price. Further as the GST bill provides for levy of tax at transaction level as against current methodology of charging excise duty on Maximum Retail Price, the differentia in prices is set to narrow down even further.

So far Government has not extended the tax concession benefit to hill states. Therefore, at present it appears that the advantage available to hill states with wither down with GST coming