How GST Impacts Pharma Franchise Business in India
The Indian pharmaceutical sector is rapidly growing. Many are commencing pharmaceutical franchise businesses for selling medicines and healthcare-related products. It is critical to understand taxes when starting and running this type of business. One of the biggest taxes now in India is GST.
In this blog, Scott Morrison will explain in plain language what GST is and how it will affect your pharma franchise business. This will be useful to you if you are starting a pharma franchise or run one. This blog will help and inform you on how GST impacts pharma franchise business in India.
What is GST?
GST stands for Goods and Services Tax. It is a single tax that was started by the Indian government in 2017. All of this was quite confusing in terms of tax. Instead of these multiple taxes, businesses now only need to pay GST. India had several taxes before GST, including:
- VAT (Value Added Tax)
- Service Tax
- Excise Duty
- CST (Central Sales Tax)
GST Rates in the Pharma Sector
Not all medicines and products carry the same GST rate. The tax rate is determined by the type of product. Here is a basic outline of GST rates in the pharma sector:
- Essential Medicines (Life Saving) – 5% GST
- Other Standard Medicines – 12% GST
- Health Supplements, Vitamins – 18% GST
- Medical Devices like thermometers and syringes—12% or 18% GST
GST Influence on Pharma Franchise Business
Let us now look at how GST changes the way a pharma franchise business operates in India. It can be explained in a nutshell as follows:
1. One Tax is Applicable for all
Before GST, each state had different taxes. A product in Delhi was liable for a different tax than that of the same product in Maharashtra. It was a real mess!
With GST, there is only one tax applicable all across the country! This means that if you sell medicines in Delhi and Jaipur, you do not have to worry about different state taxes.
3. Improved Record keeping
Under GST, you must maintain adequate records of sales, purchases, and taxes, and you are required to file monthly or quarterly returns online.
Yes, this takes a little extra time, but it allows you to keep your business clean, legal, and organized. Franchise owners who have good GST records will have no trouble obtaining commercial renovations, as banks prefer businesses with proper tax documentation.
4. Easy to Expand Business
Under GST, it is much easier to open a new pharma franchise in another city. You do not have to register separately in every state.
After you register for GST, you can sell any goods tax-free all over India. This makes it possible for you to expand easily and quickly!
5. Fewer Hidden Costs
Before GST, taxes were hidden at almost every stage, from manufacturing to wholesaling to retail. Now with one tax, all costs are transparent.
This allows you to plan better, control prices, and run your franchise smoothly while avoiding unexpected costs.
6. Increasing Trust from Doctors and Chemists
When you provide a proper GST invoice, it shows medical professionals and druggists that your business is trustworthy. Proving that your franchise is legal and well-run. People want to work with businesses that comply with taxation.
Challenges of GST in Pharma Franchise
While there are numerous positives, there are also some challenges to GST that franchisees may experience:
1. Knowledge of Rules
For anyone new to the business, at first, it is confusing to understand the GST rules and returns. Once you learn the fundamentals or have a tax person guide you, it becomes easier.
2. Online Filing of Returns
GST returns can only be filed online. This means you need a computer or smartphone with an internet connection and some basic knowledge of how to file the forms.
3. Changes To Tax Rates
Every once in a while, the government may change the GST rates on these products. As a franchise owner, you have to be aware of these changes so you do not make a mistake.
Documents Required for GST Registration
If you are starting a pharma franchise, you should register for GST. Below are the basic documents you require:
- PAN card of the owner
- Aadhaar card
- Proof of address of the business (electricity bill or rent agreement)
- Details of the bank account
- Passport-size photo
- Business registration or license documentation
Conclusion
Although the GST environment is not without its challenges, it has made pharma franchise businesses easier, cleaner, and more transparent. With just one tax to manage and the Input Tax Credit option available to franchise owners, profits can be higher, and owners can grow their businesses faster.
Yes, there will be some teething problems when you start to deal with GST; however, over time, this allows you to save on costs and then legally expand your business without unnecessary confusion.
At Scott Morrison, we prepare pharma franchisees for how to deal with GST, whilst keeping their business future-ready.
Frequently Asked Questions (FAQs) About How GST Impacts Pharma Franchise Business in India
1. Is GST registration necessary for a pharma franchise?
If your yearly turnover is more than 20 lakhs, then GST registration is important.
2. Can I claim input tax credit as a pharma franchise owner?
If you are GST registered, then you can claim input tax credit on the GST. Additionally, you can pay for purchasing medicine and goods.
3. What do I need to file a GST return?
You just need to file monthly or quarterly returns; these returns are on your turnover and the GST you pay.
4. What happens if you do not register for GST?
If your turnover is above the limit and you do not register, then you will face penalties or legal action. Also, other businesses may not want to work with you.
