Possibility of a Shortage of Medicines occur at the Time of GST

Patients are worried about the possibility of a shortage of medicines because stockists and trade channels, uncertain about modalities of the implementation of the Goods and Services Tax (GST), are attempting to reduce stocks in trade.

Stockists, worried they may suffer losses on account of a possible mismatch between tax payouts and tax refunds once GST kicks in, have started maintaining a minimum inventory and even returning stock to companies.

This might lead to a temporary imbalance between demand and supply of certain medicines for a short while and should not create a major shortage, industry experts say, adding there is no need for panic. Dealers and stockists are in a wait-and-watch mode as the rates under GST are yet to be finalised.

Distributors usually keep an inventory for 40 days, while at the retail level it’s 10 days. In case the GST rate is unfavourable, distributors in the last week of June may reduce inventory (stocks) to 15 days, but it is unlikely to have an impact at the retail level. He added that there was no likelihood of a shortage and normal inventory levels would be restored by the first week of July.

As a part of transition, and in the absence of clarity about credit for duty-paid stock on hand, all manufacturers and traders in many sectors are trying to reduce stock in trade. That is transitory and should not create a major shortage.

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