Indian government announced GST rate cuts boosting contract manufacturers with faster refunds easing tax liability, impacting CDMOs and pharma sector growth.
• GST rate cut boosts contract manufacturers in October 2023.
• Faster refunds ease input tax credit issues for CDMOs.
• Enhances capital recovery and reduces tax liability.
The recent GST rate cut is expected to significantly boost contract manufacturers in the pharmaceutical sector. According to industry executives, this reduction will serve as a catalyst for growth, particularly for contract development and manufacturing organizations (CDMOs). The cut addresses the issue of input tax credit (ITC) arising from the 18% tax on active pharmaceutical ingredients (APIs). Faster processing of refunds is suggested to help recover invested capital and ease tax liability.
Pharma leaders believe that the GST rate cut will enhance the financial health of CDMOs by reducing their tax burden. This change is anticipated to improve cash flow and enable these organizations to reinvest in their operations. Moreover, the faster refund process will allow companies to recover their capital more efficiently, thus supporting their growth strategies.
Why it matters
The GST rate cut is crucial for the pharmaceutical sector as it directly impacts the cost structure of CDMOs. By reducing the tax burden, these organizations can allocate more resources towards research and development, ultimately benefiting the entire pharmaceutical supply chain. Additionally, the faster refund process alleviates cash flow constraints, enabling companies to focus on innovation and expansion.
What’s next
Industry stakeholders are closely monitoring the implementation of these changes to assess their long-term impact on the sector. The focus will be on how effectively the refund process is expedited and its influence on capital recovery. As the industry adapts to these changes, further developments are expected in the coming months. For more insights into market and financial trends, visit our insights section.