The pharmaceutical and healthcare industry is a significant sector for the Indian economy. In terms of the volume of generic medicines produced, India is the third largest producer in the world and its rank in terms of the industry’s value stands at fourteen. The healthcare segment is expected to reach a valuation of $150 billion by the end of 2017. Like every other industry of the economy, the impact of GST is bound to be felt on the pharma industry as well.
To begin with, as different indirect taxes will be subsumed in a single tax, it will simplify the taxation system. Going further, the GST will affect the pricing, working capital, contracts with vendors, the ERP systems and internal processes in the sector.
To understand the GST impact on pharma companies, we need to be aware of the entire range of the pharmaceutical supply chain. At one end are pharma product manufacturers, contract and API manufacturers and the organisations that market the products in different parts of India. At the other end is a chain of Carrying and Forwarding Agents (C&F), distributors/wholesalers and retailers.
Two key parameters have changed in the pharma industry on account of GST. One is the manufacturing price, because many raw materials for medicines have been shifted from the 5% VAT bracket to the 12% GST bracket. Secondly, many medicinal salts and compounds have been wholly moved from 5% VAT to 12% GST rate on pharma industry. Furthermore, a number of health supplements that were earlier in the 12.5% to 15% tax bracket are now in the 18% to 28% GST bracket. The net effect of all these changes will be a significant hike in the price of medicines.
For a deeper view of the GST impact on pharma industry, we also need to consider the margins at which the complete supply chain works. In this sector, the clearing and forwarding agent has a 4% to 6% margin on the maximum retail price (MRP) of medicines, the distributor works at 7% to 8% margin on the same and the retailer has a margin of 20% on a medicine’s MRP. With the imposition of GST, the pharma companies will need to pay extra for the manufacturing cost, because the cost of raw materials has increased. Eventually, the product’s MRP will be revised to absorb the total effect.
Meanwhile, the government has also taken some steps to control and cap the price of some critical medicines, salts & compounds. This will result in a loss of 2% to 3% for the pharmaceutical manufacturing and marketing companies, who now have to bear higher costs.
From the viewpoint of wholesalers and retailers, the earning margins may not drop immediately, and supplies will be stabilised soon. The bigger concern will be the inventory held by them, on which the new GST rates will apply, although these goods were bought at the older VAT rates. In this case, the distributors and retailers will lose about 3% to 4% on their entire inventory.
Will the GST impact on healthcare industry also influence medical tourism?
By October 2015, the medical tourism sector of India was estimated to have a value of US $3 billion. It was projected to grow to $7-$8 billion by 2020. A number of studies have shown that the cost of healthcare services in India combined with the travelling and accommodation costs is around 30% to 40% lesser than similar medical procedures in first world countries such as the US, Canada, Australia and most Western European countries. The boom in India’s medical tourism has helped to generate more returns for the healthcare industry.
The overall impact of GST on healthcare and medical tourism industry will be a mix of positives and negatives. The diagnostic services have not been burdened by the tax. There is also no tax on medical devices like hearing aids. However, a 5% GST rate has been applied on vaccines, cardiac stents, diagnostic test kits and dialysis equipment. The rate of GST for X-ray tubes, radiotherapy apparatus and surgical instruments will be 12% and for high-end medical equipment, an 18% tax rate will be applied. While patients located in India may end up paying a higher cost for some products and services, the medical tourism industry is expected to grow, as the comparative costs in a few other countries still give an advantage to India.
Yoga, meditation centres and organic living practices in India also attract tourists from other parts of the world. The country is a home to a myriad of alternative practices like Homeopathy, Ayurveda, Siddha and Acupuncture, which are popular among medical tourists. These give an edge to India over Asian countries like UAE, Oman, Singapore, Malaysia and Thailand. However, the GST rate on Ayurvedic products has been raised to 12%. It attracted a levy of only about 5% in the pre-GST regime. This may impact the price of natural medicine products if the manufacturers decide to pass on the burden to customers. Visits to yoga classes will also be expensive, as it is yet another segment that has become taxable under GST.
Overall, the GST impact on healthcare and pharma industry is not fully established. The obvious benefit will be by way of reduced complexities and the consolidation of multiple taxes into a single rate. The negative impacts will be felt in the form of increased prices for customers and reduced margins for businesses in the supply chain. The GST Council is still deliberating over some reforms to alleviate the burden on the people affected.
Capital Float has been taking note of the changing conditions post the implementation of Goods and Services Tax on 01 July 2017. With the aim of promoting entrepreneurship in India, we maintain our convenient lending services to businesses in all the industries including the pharmaceutical and healthcare sector. We support the Make in India initiative and only happy to answer any query that you may have on the finance product that suits your business, loan interest rates and terms.
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The radio taxi business in India has seen a big boom in the last few years. Whether it’s the number of taxis or users, both have seen an upward swing. Analysts foresee an even higher growth in future. Viable basic fare along with lucrative incentives makes radio taxis an ideal choice for customers and drivers alike. However, using a rented car restricts a driver’s earnings considerably, as they work on fixed salaries. This is where Capital Float’s Taxi Finance steps in as an ideal taxi loan choice for drivers who aspire to have a car of their own and earn more.
Our association with some of the largest taxi aggregators in India makes taxi financing a smart choice for an Uber loan or other kind of taxi loans. It provides an opportunity for drivers across the country to purchase cars and fulfill their dream of becoming microentrepreneurs. Securing a taxi loan from a traditional finance institution or bank can often be a tough task. With multiple evaluations and lengthy procedures, getting a taxi loan successfully from these institutions is a time-consuming prospect. Failing to meet any of their highly demanding requirements can lead to loan rejection. In contrast, Capital Float offers an easy process for procuring a taxi loan with fast processing and minimal documentation.
To successfully avail of a taxi or Uber loan, there are some basic requirements borrowers need to fulfill. If their application meets these requirements, they can get taxi loans like Uber loan and Ola finance surprisingly fast. Here is the list of taxi financing requirements, which are needed for a taxi loan.
1. Down payment: The applicant is required to pay a certain sum as down payment for availing taxi loans. The high down payment required by traditional lenders and banks often deters drivers from owning a car of their own. This is where Capital Float’s taxi financing differs from conventional lenders. Capital Float provides a taxi loan for an easily affordable down payment — one of the lowest in the industry.
2. Valid driving license: Borrowers must have a valid driving license to apply for an Uber loan. Not having one will mean their application could be rejected.
3. Valid taxi permit license/badge: The applicant must have a valid taxi permit license or badge to be eligible to apply for taxi finance. The time period for the taxi permit/badge can vary with lenders. At Capital Float, the applicants need to have a valid taxi permit license/badge that is one year old for new drivers with the taxi aggregators.
4. KYC documents: To be eligible for taxi financing, applicants need to submit KYC (Know Your Customer) documents at the time of application. At Capital Float, we request minimum documentation and ensure a hassle-free processing of the taxi or Uber loan. The application process for taxi loan at Capital Float happens online. This makes the process more convenient where the applicant can upload the documents directly with minimal paperwork.
Though all of the above are mandatory requirements for getting any kind of taxi loan including Uber loan and Ola finance, there are certain other things the applicant should keep in mind while applying for an Uber loan. This makes it easier for drivers or applicants to pick a lender that suits them the most.
Flexibility in repayment: The repayment of taxi loans can sometimes stretch the borrower beyond capacity with equated monthly payments or EMIs. If drivers have a more flexible option for repayment, it can bring down the pressure of EMIs to a large extent. Capital Float provides a weekly repayment option for taxi loans. This reduces the size of the installments and ensures payments are not carried over/missed. This can be a big boon in a business where daily earnings are dependent on factors beyond the control of the borrower.
Processing fee: Besides having time-consuming and complex processes, traditional banking institutions levy a processing fee. This can vary depending upon the lender and generally tends to be higher in traditional banking institutions. At Capital Float, however, we charge only a minimal amount as processing fee in a bid to keep things transparent and enable our customers.
Ease of application: It’s the age of digitization and online is the preferred channel for an taxi loan application. Capital Float’s taxi loan applications can be made online, require minimal documentation for processing and are disbursed within 3 days.
Hidden charges: Pre-closure charges which are levied by banks and conventional lenders are an additional burden for borrowers. These charges prevent borrowers from closing the loan early even if they can. Capital Float levies no pre-closure charge and borrowers are free to close the taxi loan before the completion of the loan tenure.
Collateral: Typically, banks tend to sanction a taxi loan if the applicant has substantial collateral, which can be used to recover a bad debt. Capital Float however disburses taxi loans without requesting for collateral, thus improving the chances of many applicants to secure an Uber loan or other taxi financing.
Processing time: Applicants who wish to get a car of their own at the earliest are discouraged by the long time taken to process traditional loans. Due to late loan disbursements, they end up losing valuable business. Capital Float’s taxi financing process is prompt, and funds are credited within just 3 days to enable drivers to start earning at the earliest.
Capital Float’s taxi financing with minimal requirements along with prompt processing makes it an ideal choice for aspiring microentrepreneurs who hope to succeed in radio taxi business.
Oct 24, 2018
The 2017 Union Budget underlined the significant role that Small and Medium Enterprises (SMEs) play in the development of the country, in terms of industrial output, exports and generating employment. While SMEs contribute to the growth of the country, they face challenges in raising finances due to their size and their inability to provide adequate collateral.
Many SMEs have operational problems due to improper management and as a result, the lenders are wary about extending SME finance. To cover their risk, they charge higher rates of interest, insist on proper collateral, take extra efforts during due diligence, and even try to appoint their representative on the company board. Given the extra effort required when it comes to SME lending, traditional SME finance companies take a long time to disburse the loans.
Institutional route to SME finance
SME need loans to finance their working capital requirements. SME finance for working capital requirements traditionally starts with the establishment of cash credit, overdraft and working capital limits with the banks. SME finance is also required for purchasing assets and for expanding and scaling the business. For this purpose, term loans are secured from banks and SME finance companies for purchasing assets and for meeting other incidental expenses. Apart from these sources of finance, SMEs can also secure funds from the following traditional sources:
- Export credit to finance the pre-shipment and post-shipment export-related activities.
- Letters of Credit (LCs) and bank guarantees to facilitate trade and meet the performance and financial obligations.
- Bill discounting where bills of exchange which are covered by LCs or bank guarantees are discounted by banks, NBFCs or SME finance companies.
- Leasing where the banks, NBFCs or SME finance companies buy the asset on behalf of the SME and then lease it back to the SME.
- Factoring and securitisation where illiquid assets are used to secure advances from banks, NBFCs or SME finance companies.
- Venture capital investments from individual investors or companies.
Government impetus to SME lending
Recognising the issues faced by small businesses and their criticality to India’s development, the Government has initiated several measures to ease the credit availability for this segment.
- The finance minister has set the lending target for SME finance at Rs 2.44 lakh crore for 2017. In other words the directive ensures that banks and financial institutions will disburse loans to SMEs collectively worth Rs 2.44 lakh crore through this year.
- The Government’s Credit Guarantee Scheme (CGS) under the Ministry of Micro, Small & Medium Enterprises (MSME), which secures the loans given by banks to SMEs, now has an increased outlay of Rs 2 crore from the earlier Rs 1 crore.
- The 2017 Union Budget infused Rs 10,000 crore of capital into state-owned lending institutions to promote SME lending.
- SMEs can continue to avail of loans under the Pradhan Mantri Mudra Yojana, where SME finance is disbursed to small businesses as working capital loans or short-term loans. The amount ranges from Rs 50,000 to Rs 10 Lakh and no collateral is required as they are covered/secured by the CGS scheme.
Alternative SME finance channels
Rapid strides in technology are changing the banking and financial industry and several new channels of credit are emerging as viable alternatives for cash-strapped SMEs.
New age FinTech companies are using advanced technology to introduce new SME lending products that have quick and easy approval processes. Companies like Capital Float have made it easier to secure SME finance. Such new age SME finance companies have introduced online portals and mobile apps that can be used by SMEs to apply for and manage loans. They have simplified and shortened the loan approval process by using big data and analytics to evaluate loan applications.
New age SME finance companies like Capital Float have also introduced innovative financial products for customised SME lending. These new SME lending solutions include:
Collateral-free financing solutions: These are unsecured loans given by the SME finance companies to SMEs who cannot or do not want to provide any security. FinTech SME finance companies like Capital Float use technology to swiftly assess the credit-worthiness of the loan applicants and speed up disbursal so that a business owner can receive the loan amount in their account within 72 hours. Capital Float also has easy and flexible repayment terms which make the loan easier for SMEs to manage.
Merchant cash advances or credit card receivables: These unsecured loans or advances can be availed of by SMEs who use Point-of-Sale (PoS) terminals. The amount advanced is dependent on the monthly credit card sales generated on the point-of-sale machine.
Online seller finance: This is a working capital loan given to e-commerce vendors for managing their day-to-day operations and leveraging business opportunities.
Supply chain finance: In this kind of financing, the SME finance company liquidates the borrower’s invoices by paying up to 80% of the invoice value to the borrower.
Capital Float is one of the leading SME finance companies that uses FinTech to create SME-friendly credit options. It provides short term unsecured loans to SMEs, and a basket of customised financial products that cater to the needs of small entrepreneurs. These include online seller finance, supply chain finance, merchant cash advance, and Pay Later, which is a revolving credit facility.
Oct 24, 2018