Cos from various sectors raise concerns over ITC

WITH the September 22 deadline for rolling out goods and services tax (GST) reforms getting closer, several sectors pharmaceuticals, fertilizers, textiles, and confectionery continue to raise concerns over the likely build-up of input tax credits (ITC).

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Industry players say the rate rationalisation has created inverted duty structures, squeezing working capital, making it particularly challenging for smaller firms.

"The recent reforms on GST have caused an inverted duty structure, where the GST on finished pharmaceutical formulations drops to 5% and the tax on active pharmaceutical ingredients (APIs) sits comfortably at 18%. In such cases, the accumulation of unutilised ITC becomes quite pronounced, especially for companies that are importers of APIs, because the tax on inputs is greater than the tax on outputs," said Jeevan Kasara, director and CEO, Steris Healthcare.