CASE: CIPLADe-addictionsegment is valued at over Rs 100 crore annually, and nicotine polacrilex productsconstitute around 70 per cent of the segment.
Cipla is amongst the majormanufacturers of nicotine gums in India withtheir product NICOTEX.How Nicotine ReplacementTheory WorksThe principal mechanism of action of nicotine replacementtherapy (NRT) is to partially replace the nicotine formally obtained fromtobacco. It provides small and sustained quantities of nicotine without theharmful gases of smoking, to reduce the severity of withdrawal symptoms andcravings.If a person relapses to smoking while taking NRT, the cigarette wouldbe less satisfying and the person less likely to resume. Hence, NRT alsoprovide a coping mechanism, making cigarettes less rewarding to smoke.ImpactOf GSTThe GST rate on nicotine gums has been fixedat 18%.
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“Dueto an increase in the GST rate on products relatedto nicotine replacement therapy from 10per cent to 18 per cent, there will be a negative impact on accessibility andavailability of this therapy to consumers making it contrary to government’slarger objective of tobacco de-addiction,” saida Cipla spokesperson.CIPLAalso enjoyed the perks of being excise free due to its manufacturing plantsbeing in the excise-free zones (Jammu & Kashmir, Himachal Pradesh, Uttrakhand and thenortheastern states). After implementation of GST. all entities exempted under payment of indirect tax under any existing incentives scheme of central or stategovernments shall not continue under the GST regime and existing units shall pay tax under the GST regime.
Under the discretionary powers left to it by theCouncil regarding these incentives, the finance ministry has proposed to providebudgetary support for refunding its share in GST to such units to which exemptions in indirect taxes weregranted, for promoting industrialisation. According to a finance ministry official, a budgetaryprovision will be made to refund the central government’s share in thoseincentives for the residual period of the unit. The refund will apparently beto the extent of 58 per cent of the Centre’s share of GST..Atpresent, India is estimated have over 100 million smokers and is said toaccount for a fifth of all tobacco-related deaths worldwide.Thecentral government included tobacco de-addiction as one of its seven priority areas in itsnew health policy. As a part of the policy, the government aspires toreduce tobacco use by 15 per cent by 2020 and 30 per cent by 2030.
Introduction of GST is expected to have a significant impact on tobaccocessation programs ass it will make Nicotine Replacement Therapies expensive.