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FOPE, KDPMA, Grant Thornton Bharat & EY term GST restructuring as a game-changing step
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Nandita Vijayasimha, Bengaluru
September 05 , 2025
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The Federation of Pharmaceutical Entrepreneurs (FOPE), Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA), consultancy majors Grant Thornton Bharat and EY have underscored that the Union government’s move on GST restructuring is a game-changing step.
Harish K Jain, president, FOPE and director Embiotic Labs stated that the decision by the GST Council to reduce the levy on medicines is a game-changer having a cascading positive effect.
This decision has come at a time when the pharma industry is facing unprecedented challenges and headwinds. Indian patients will be greatly benefitted with drastic reduction in their out-of-pocket expenses on healthcare and will lead to patient compliance as well as market expansion, he added.
Even as we whole-heartedly welcome this decision, the sore point of the whole exercise is inverted GST structure, which has not been corrected. This will lead to pressure on working capital. In view of inverted GST structure, GST paid on capital goods and services will be stuck. Another challenge will be navigating price revisions as per DPCO on existing stock. As assured by GST Council, we hope that during this transition period the industry will not have to face anti profiteering and NPPA compliance challenges, said Jain.
For Jatish N Sheth, president, KDPMA and director, Srushti Pharma, the reduction of GST on pharmaceuticals and its exemption on certain lifesaving drugs and cancer medicines will be a major relief as it reduces healthcare costs. Another is the exemption of GST on medical insurance policy bringing in affordability and widening the net of policy holders. Overall, reduction of GST on a lot of products will increase the purchasing power of the consumer and will give the much needed boost to the economy.
Yet, the concern is credit of GST on input materials which will be in excess of utilisation. Refund system needs to be time-bound otherwise it will lead to cash flow problems especially for the MSME sector, he noted.
Manoj Mishra, partner and Tax Controversary Management Leader, Grant Thornton Bharat LLP said GST rationalisation brings a decisive win for patients and the pharma industry alike. By keeping formulations at just 5%, treatment cost for households becomes more manageable. Nearly 36 life-saving drugs from cancer therapies to rare disease medications are now fully exempted. This is not just a tax policy; but a lifeline that puts affordability and public health in the forefront.
For pharma players, the clarity on a 5% slab and exemptions removes long-standing ambiguity, enabling transparent pricing and better market planning. The move will expand access in semi-urban and rural markets, ease litigation, and free up resources for innovation. Above all, it signals a shift in GST’s philosophy where taxation aligns with social priorities, ensuring that access to critical medicines is never compromised by cost, added Mishra.
Suresh Nair, tax partner, EY India, stated, “GST rate restructuring in pharma sector is transformative for accessible healthcare. By lowering GST on all medicines from 12% to 5% and granting nil rates to 36 vital lifesaving drugs for cancer and rare diseases, it would significantly reduce patient expenses and improve access to essential therapies. Reducing GST on medical equipment from 18% or 12% to 5% further enhances affordability. GST on job work services for the pharma sector has also been reduced from 12% to 5%. This citizen-focused reform promotes equitable healthcare, strengthens public health and industry growth, and reinforces India’s global pharmaceutical leadership."
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