GST & Income Tax-I

I wonder, whether the GST section and IT section of the Finance Ministry have either thought or worked out a methodology for taking advantage of one another.

While I have respect for the highly educated bureaucrats, I differ with their style of thinking and their mind set.

In this message, I shall only write about the likely chances of Income Tax department taking advantage from their GST counterpart.

I shall give an example of medicines being sold with GST invoices. What all is required, is to make it compulsory for the invoice to have the brand name of the medicine, and also the generic name of the medicine sold under that GST invoice.

About four years ago, during mid 2014, IV injection with the generic name “Meropenem Injection IP 1g” was available under the brand name “Merocrit” manufactured by CIPLA, and had MRP of Rs 2695/=. This IV in many cases is required to be administered thrice a day. It means that the patient would need three bottles of this medicine every day.

However, the same medicine was available under the brand name of “Merotrol” manufactured by Lupin, and had it’s MRP of Rs 899/=.

It means that three doses of brand made by Lupin were available almost for a single dose of brand name of Cipla, when the generic medicine was the same. It was evident, that the MRP of each of this brand had the company profits included.

Hospitals like Lilavati, always used the CIPLA branded medicines, inflating the cost of treatment to it’s patients.

My question is, when CIPLA was selling this one medicine at thrice the cost of the same medicine manufactured by Lupin, surely the profits of CIPLA must have been sky high. Did Income Tax department have any advantage for collecting higher Tax for the same? Or was the extra amounts received due to inflated MRP were used for distributing among some people connected to the hospital?

Was this known to Income Tax, and if so, were some persons from the department also had same advantage like the people from Lilavati?

To summerise, if the GST Invoice has the name of the medicine in generic and branded forms, then the prices for all the manufacturers for each generic medicine sold could be compared to find the anomalies, which may help Income Tax department to improve it’s collections.

Most of the Hospitals have separate Chemist’s shop, from where supplies are sent to the hospital patients, and also outsiders can come an buy medicines from this shop. In such a case, this shop MUST have a separate GST number and should function as an independent entity.

Just a suggestion. If IT department can collect more from such large entities, the burden on salaried middle class shall get reduced. more