The All India Organization of Chemists and Druggists (AIOCD), an apex body of around 8 lakh chemists and druggists in the nation, has asked GST Council to introduce a special provision in the GST for the return of expired drugs and formulations (reverse logistics) to determine ambiguity prevailing among drug traders.
AIOCD in a letter to Upender Gupta, Commissioner, GST said that the average period of expiry of medicine is around three years. Before the introduction of GST, following three years the retailers return the products under their challan to the wholesalers who in turn come back to the company.
The company gives the credit note with excise duty and sales tax. There an immense number of transactions between the company and the distributor, and distributor and the retailers. Subsequently, it is practically impossible to connect the return quantity with the purchase invoice.
According to provisions of Drugs and Cosmetic Act, 1940 the retailer can’t prepare sales invoice on the distributor for expired medications. So also distributor can’t raise invoice on the company for return of goods.
Under GST the goods might be come back to the distributor after setting the invoice. This contradicts the provisions of the Drugs and Cosmetics Act 1940. Subsequently, the trade body sought clarification on the nature of document to be set up in regard to the return of expired medications and way of a reversal of credit.
As said above, normally there is a period of three years between the date of manufacture and date of expiry. In this manner, the expired drugs are returned after the finish of the period of yearly return. For example, the medicines purchased in 2017-18 will expire in 2020-21.
According to section 34 (2) of CGST/SGST Act 2017, the credit note can be issued for purchase made in 2017-18 by September 2018 or the date of documenting of yearly return whichever is prior. The period provided under Section 34(2) isn’t adequate for the return of expired goods.
It is suggested that the period for return of expired goods should be increased considering peculiar conditions of pharma trade. Special provision should be made in GST law for inversion of reversal of purchases and tax credits beyond the period specified in segment 34 (2), said AIOCD.
Other than this, the drug trade body additionally suggested that composition limit for little trader should be increased up to Rs. 1.5 crore from Rs. 75 lakh. Exemption limit should be increased up to Rs. 50 lakh from Rs. 20 lakh. GST return should be made quarterly rather than month to month filing.