3 hrs ago
GST Council May Back 90% Pharma Refunds in Law
Medicine companies often pay more tax on ingredients than they collect when selling medicines.
This can leave money tied up while they wait for tax refunds.
The GST Council is considering putting a system for releasing most eligible refunds into law.
It is also considering treating some work done for foreign clients as exports.
Companies may be able to claim tax credit for free samples and medicines they must destroy after expiry.
Some medicines and special foods for seven additional rare diseases may become exempt from GST.
These changes could lower costs or make refunds easier for businesses and patients.
Companies may also need to keep detailed records to show what happened to samples and expired medicines.
The GST Council is considering giving legal backing to provisional release of 90% of eligible inverted-duty refund claims.
Pharma companies pay 18% GST on many raw materials but collect 5% on finished medicines, leaving excess tax credits.
Proposals may treat certain work for foreign clients, including clinical trials and contract manufacturing, as exports.
Companies may be allowed input tax credit for free medicine samples and medicines destroyed after expiry.
Proposed exemptions for medicines and specialised foods could cover seven more rare diseases, while new record-keeping obligations may apply.
- Who
- The GST Council is considering proposals affecting pharmaceutical and life sciences companies and patients with certain rare diseases.
- What
- The proposals include legal backing for provisional refunds, export treatment for some overseas work, input tax credits, and exemptions for certain rare-disease treatments.
- Where
- India.
- When
- The proposals are being considered ahead of an upcoming GST Council meeting; an existing CBIC instruction was issued in October 2025.
- Why
- The proposals aim to address tax costs and refund delays faced by the pharma industry and reduce the cost of some rare-disease treatments.
Potential benefits
Potential challenges
Refund certainty
Potential benefits
Giving statutory backing to provisional release of 90% of eligible claims could provide companies greater certainty and free up working capital.
Potential challenges
The proposals remain under consideration, and the article notes implementation challenges for companies.
Tax credits for samples and expired medicines
Potential benefits
Allowing input tax credit could remove tax costs for free samples and products that must be destroyed after expiry.
Potential challenges
Companies may need to maintain proper disposal records to avoid disputes with tax authorities.
Research and consultancy certification
Potential benefits
Self-certification by institutional heads could streamline approvals.
Potential challenges
It could place considerable legal and audit liability on research heads, according to Sukhender Kumar.
Key facts
- Provisional refund share under consideration
- 90% of eligible inverted-duty refund claims
- GST on many raw material inputs
- 18%
- GST collected on finished medicines
- 5%
- Existing refund instruction
- CBIC instruction issued in October 2025
- Potential export treatment
- Work in India for foreign clients, including clinical trials, testing and contract manufacturing
- Potential rare-disease coverage
- Medicines and specialised foods for seven additional rare diseases
- Implementation concern
- Companies may need records documenting disposal of expired medicines and free samples
Quotes
Sukhender Kumar
Senior manager (health care advisory) at Nangia & Co
“But the industry must prepare to navigate key implementation challenges. Entrusting institutional heads with the self-certification of research or consultancy streamlines approvals but places considerable legal and audit liability directly on research heads.”
financialexpress.com
Sources
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