GST impact: Expired drugs worth Rs 60 crore pile up with chemists

BENGALURU: Chemists and druggists in the city are sitting on piles of expired drugs worth at least Rs 60 crore. Procedural issues thrown up by the new GST regime has meant that they have been unable to exchange old drugs for new as they used to under the previous VAT regime.

Prior to GST, medicines attracted a flat 5% VAT. Under GST though, medicines have been bracketed under two slabs — 5% and 12% — with a majority of the drugs under the higher tax slab. The difference in tax rates is at the root of the problem.

Earlier, chemists returned expired drugs to the manufacturer through the distributor. In return, they were reimbursed in the form of goods equal to the worth of the drugs returned. However, ruling out reimbursement, the government recently stated that expired drugs could be returned to the manufacturer/distributor as ‘goods’ and not as ‘supply’.

In return, the retailers get credit notes if the drugs are returned within a cut-off date. But, manufacturers are refusing to replace expired drugs with new ones and are willing to issue credit notes only after examining invoices raised during purchase.

“The government has not specified what is meant by cut-off date,” a chemist said on the condition of anonymity. “How can there be a cut-off date for a drug that has expired? We are at the end of a chain while the manufacturer is at the other end. And many of the invoices are with the distributors. Some distributors are asking us to accept a 40% cut while returning expired dugs.”

The stock of expired drugs has been growing for nearly seven months and druggists have now written to Prime Minister Narendra Modi, urging him to abandon credit notes and instead replace the expired drugs with new ones.

“A drug remaining unsold after its expiry date is the burden of the manufacturer. They are now insisting that we produce the invoices,” said V Hari Krishnan, president of the Bangalore District Chemists and Druggists Association. He insisted that expired drugs must be dealt with in compliance with the Drugs and Cosmetic Rules 1945.

“Earlier we lost about 15-20% of the cost of expired drugs, but now we are facing the prospect of losing 40% of the cost,” a chemist from Shanthi Nagar said. “That’s a huge loss for products unsold and expired.”

As per the rule book, drugs once expired must be returned to the distributor within 150 days. “The drugs controller office has also been informed about the problem,” said M K Mayanna, President of Bruhath Bengaluru Chemists and Druggists Association. “We have called for a meeting between distributors and chemists on February 3 to discuss the issue.”

A senior officer from the drug controller’s office said the manufacturer is responsible for the disposal of expired drugs. “The stalemate has been brought to our notice. But tax related issues do not come under the purview of our department,” the officer said.