Upset over a section of pharmaceutical industry’s lackadaisical attitude towards issuance of credit notes for distributors’ damaged/expired products, the All India Organisation of Chemists and Druggists (AIOCD) has called on drug firms to accept their expired/damaged goods for credit notes without considering delays of any period till the end of 2019.
The credit notes should be issued on the basis of price to stockists of VAT regime (old)+ % of VAT as applicable, said the trade body in a letter to drug industry on August 21. It also urged the industry to reimburse traders for GST losses that arose due to changes in the tax rate with the implementation of the goods and services tax (GST) from July 1, 2017. Before GST maximum retail price (MRP) of drugs and trade margins were built around value added tax rate of 5-6 per cent. Post GST rate of tax and duties on pharmaceuticals worked out to around 12 per cent. Distributors borne the differential tax cost which came around 7 per cent.
After the implementation of GST pharma trade and industry experienced hiccups in settlement of leakage/breakage/expired goods. The AIOCD had various meetings with pharmaceutical companies and communicated to settle claims considering principal of no loss to trade members which was accepted by the firms. In spite of several communications and reminders, it is observed that pharmaceutical companies have still not settled leakage/breakage/expired goods’ claims as per agreed norms.
Said AIOCD president JS Shinde, “We have been receiving complaints from our members that many of the pharmaceutical companies have not settled claims as per agreed by them, particularly, most of the companies issuing credit notes with zero amount without specifying any reason.”
We have appealed to the drug firms to settle such claims by issuing additional credit notes immediately, he added. The trade body has also sought special provision for expired drugs and formulations in GST. As per provisions of Drugs and Cosmetic Act, 1940 the retailer cannot prepare sales invoice on wholesaler for expired medicines. Similarly wholesaler cannot raise invoice on company for return of goods. Under GST the goods shall be returned to the wholesaler after preparing the invoice. This contradicts the provisions of the Drugs and Cosmetics Act 1940, said Rajiv Singhal, general secretary of AIOCD.
It also appealed to the GST Council to increase the period for return of expired goods under Section 34(2) considering peculiar circumstances of pharma trade.
As per Section 34 (2) of CGST/SGST Act 2017, the credit note can be issued for purchase made in 2017-18 by September, 2018 or the date of filing of annual return whichever is earlier. The period provided under Section 34(2) is not sufficient for return of expired goods because there is a period of three years between date of manufacture and date of expiry. Therefore, the expired medicines are returned after the end of the period of annual return. For instance, the medicines purchased in 2017-18 will expire in 2020-21, said Singhal.
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