Before 1 July, there were concerns that food supplements and nutraceuticals would become significantly more expensive due to the impending new GST structure, which includes a maximum GST rate of 28%.
As it stands, nutraceuticals, as well as health and fitness supplements, are now subject to 18% GST (the second highest tax rate), an increase from the previous 12% tax rate. Meanwhile, the tax on pharmaceutical products has risen from 5% to 12%. In the top tier of the new GST structure are coffee and protein concentrates — among others — which are now taxed at 28%.
Major oversight
Sandeep Gupta, vice chairman of the Indian Drug Manufacturers’ Association’s (IDMA) national nutraceutical committee, believes supplements comprise a “major sector missed out by the GST Council”, since they do not fall under any existing category or classification with regards to the new GST structure.
Criticising the lack of clarity from the GST Council, he said: “This could create chaos and gross violations due to wrongful interpretations by regulatory authorities. The industry is left with no option other than to follow Akin Rule 4.”
The rule in question dictates that goods that cannot be classified in accordance with existing government rules “shall be classified under the heading appropriate to the goods to which they are most akin”, which in this case is packaged and ready-to-eat foods.
While most nutraceutical products are indeed packaged and ready-to-eat, Gupta believes it is necessary for them to be placed under a specific classification in the new GST system, and be subjected to 12% GST, as opposed to the current 18%.
Taxation expectations
He revealed that the industry had expected nutraceuticals to be taxed at the lower rate of 12%, “since these products are beneficial to human health, and may prevent numerous illnesses diseases that could be life threatening”.
He pointed to the prevalent issue of malnutrition in India, saying that “nutraceuticals, and health and dietary supplements can make a large difference”.
So far, the IDMA has written to India’s finance minister Arun Jaitley, as well as the prime minister’s office, Ministry of Health, Ministry of Food Processing Industries, and Food Safety and Standards Authority of India (FSSAI) in the hopes of having the 18% GST rate on nutraceuticals revised down to 12%.
Gupta believes increased taxation on nutraceuticals will “limit the entry of new players or start-ups” into the market, and slow down market growth, with established nutraceutical companies likely to put expansion plans on hold.
He also said that the higher GST rates “would mean serious impact on affordability to consumers”, and would severely limit consumer accessibility to nutraceuticals and supplements.
Appealing to the authorities
The IDMA, alongside several other nutraceutical organisations and committees, are at present trying to arrange an appointment with the Ministry of Finance and the GST Council.
Gupta said the association wants to convene a meeting with its members to help the sector seek support to reduce the GST on nutraceuticals to at least 12%, and preferably 5%
This, he believes, “will foster accessibility and affordability”, which will in turn benefit the country’s population in terms of health and nutrition.