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RDCA raises alarm over ‘unworkable & unsustainable’ transition to the new GST regime
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Peethaambaran Kunnathoor, Chennai
September 10 , 2025
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The pharmaceutical trade in Delhi is sounding the alarm over what it calls an unworkable and unsustainable transition to the new Goods and Services Tax (GST) regime.
In a series of letters to both the Delhi government and its industry partners, the Retail Distribution Chemist Alliance (RDCA), the body of chemists and druggists in Delhi, has warned that the financial distress caused by the new tax structure could lead to a severe medicine shortage across the capital.
The latest GST reforms, which comes into effect on September 22, 2025, have reduced the GST rate on most medicines from 12 per cent to a concessional rate of 5 per cent. While this move was intended to benefit patients by making medicines more affordable, it has created a major crisis for distributors and small pharmacies, says the trade body.
RDCA president Sandeep Nangia explains that the core problem is the significant mismatch between the higher taxes paid on existing stock and the new, lower rate at which it must be sold. This has resulted in a massive accumulation of unutilized Input Tax Credit (ITC), which the RDCA argues, cannot be adjusted within a reasonable timeframe. The letter to industry partners explicitly states that the 7 per cent ITC difference from the stock purchased at the old rate is causing not only a financial burden but also ‘mental pressure’ on stockists and distributors. The alliance firmly stated that a 12-month window for adjusting this credit is simply not possible.
In a direct appeal to Delhi's Chief Minister, Rekha Gupta, the RDCA has requested urgent intervention. The letter highlights that small, neighbourhood pharmacies, which are crucial to public health and serve millions of patients daily, lack the financial capacity to absorb these losses. The RDCA warns that if corrective measures are not taken immediately, this financial stress could disrupt the entire medicine supply chain, jeopardizing patient care in Delhi.
The letter to the CM outlines three key demands such as immediate clarification on a mechanism to adjust or refund the excess ITC, special transitional relief for pharmacies and distributors, and the consideration of a short-term compensation scheme. This plea underscores the critical need for a smooth and practical transition to the new tax regime, one that protects the financial viability of the pharmaceutical business while safeguarding the interests of the public.
Beyond its appeal to the government, the RDCA has also taken a strong stance with its industry partners. While some companies have shown a good gesture and understanding, the alliance has criticized others for focusing solely on their sales interests and ignoring the real hardships faced by the trade. The association has made it clear that the current arrangement is not acceptable and has urged all companies to provide appropriate compensation to their trade partners instead of just passing on compliance instructions.
The ongoing crisis demonstrates a significant disconnect between the intended benefits of the GST reform and its real-world impact on the ground. The RDCA's united front and dual-pronged approach, lobbying both the government and the industry, signal the gravity of the situation. With the new GST rates already in effect shortly, the coming weeks will be crucial to see if a fair and practical solution can be found to prevent irrecoverable losses and ensure that medicine availability is not compromised.
Talking to Pharmabiz, Sandeep Nangia said, "The 7 percent input difference is both a financial and mental pressure on the trade, and an adjustment within 12 months is simply not possible. We need a fair and practical solution now to prevent irrecoverable losses." As regards the industry, he said the association is urging companies to take corrective measures and compensate us appropriately, instead of simply passing on compliance instructions.
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