The DGGI acts on pharmaceutical companies for GST fraud; Dr Reddy’s, Glenmark, Aurobindo Pharma, Mylan and Cipla under the hammer


GST Pharmaceutical Companies: The Directorate General of GST Intelligence (DGGI), which works under the aegis of the Ministry of Finance, has taken action against many large pharmaceutical companies in the country for failing to declare the Goods and Services Tax (GST). Pharmaceutical giants included are Dr. Reddys Laboratories, Glenmark, Aurobindo Pharma, Mylan and Cipla, as reported by Tarun Sharma of Zee Business.

The aforementioned pharmaceutical companies failed to pay tax in violation of the rules of Section 25 of the GST, upon which this action was taken, he added.

The DGGI, the investigative arm of the Central Board of Indirect Taxes and Customs (CBIC), carried out an investigation into taxation in companies in the pharmaceutical sector, in which it was revealed that these companies had not paid tax since the introduction of the GST. Pharmaceutical companies did not pay by misinterpreting Article 25, Sharma said.

Which companies owed how much tax?

The investigation revealed that Dr Reddys failed to pay tax of around Rs 130 crore. Apart from that, Glenmark did not pay a tax of Rs 125 crore, Aurobindo Pharma Rs 60 crore, Mylan Rs 20 crore and Cipla Rs 18 crore, he explained.

Companies admit their mistake

After the DGGI investigation came to light about the non-reporting of GST, these pharmaceutical companies accepted their mistake and paid the unpaid GST. However, after that, the GST department not only checks Section 25. The department also monitors many other things, such as some companies that ship their drugs overseas, which were rejected by the USFDA. But the companies levied an ITC (Input Tax Credit) in the country, which was not repaid, according to Sharma.

What is Section 25

According to Section 25 of the GST, if a company makes a payment from its head office to the branch, then it has to pay GST on the transfer of more than 20 lakhs. But these companies did not pay tax on transactions above 20 lakhs, Sharma explained.

Businesses will stay on GST’s radar even more

After this action by the DGGI, these pharmaceutical companies will be even more on GST’s radar. The GST department will now see not only their Section 25, but other transactions as well, he added.

Market expert Siddharth Sedani said that despite this news, the pharmaceutical sector has already bottomed out, which leaves room for improvement. And in such cases, Cipla has proven to be a good stock.

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