The GST aims to streamline India's tax regime levied on goods, including central and state-level taxes.
However, food supplements and nutraceuticals have not yet been included in the upcoming GST categorisation, to be introduced on 1 July. This means that under the new plan, products such as energy drinks, whey protein, and vitamin supplements could be subject to the maximum 28% tax rate, up from the current level of 18-22%.
In May this year, healthcare and pharmaceutical associations such as the Confederation of Indian Industry requested clarification on tax rates for food supplements and nutraceuticals from the GST Council. Others who approached the council regarding the matter included major companies such as Amway, Abbot, Danone, Pfizer, GSK, DSM, and Nestlé.
The vice chairman of the Indian Drug Manufacturers’ Association’s (IDMA) national nutraceutical committee, Sandeep Gupta, said, “We expect clarity on the GST rate for nutraceuticals and food supplements, which they have missed out.”
The health ministry has assisted the government in categorising dietary foods, food supplements, health drinks and nutraceuticals, which consist of both over-the-counter products and products prescribed by licensed doctors. However, categorising certain products for tax is less straightforward.
Deloitte Haskins and Sells senior director MS Mani said: “Health products which have similar composition and usage would tend to be classified on a common basis, as it’s difficult for the tax authority to determine whether the product is therapeutic, (a) nutritional supplement, or for recuperative purposes etc. In the absence of differential classification, based on specific parameters, there is risk of several products attracting GST at the higher rate.”
Energy drinks, as well as vitamins in liquid, powder or tablet form, are prime examples. The latter is neither a drug nor food product, and manufacturers think 5% or 12% GST for such products should suffice. The GST Council, on the other hand, has set the tax rates for life-saving drugs and ayurvedic medicine at 5% and 12% respectively.
There is also the concern that a higher GST rate on supplements could affect the less well-off. Vital Nutraceuticals’ director Ganesh Kamath said that if there is no clarity regarding the categorisation of such products, manufacturers might try to steer clear of possible trouble by levying the maximum 28% GST on their products, making them too expensive for poorer women and children.