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What You Need to Know about the GST Impact on Pharma and Healthcare Industry?

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.

Oct 24, 2018

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Quick Business Loans for SMEs and MSMEs

Many enterprises launch themselves with great hope and confidence. However, on an average, one in every four start-ups fails to make it past its first year due to a paucity of funds. Low profits, high overhead or unforeseen expenses, incorrect product pricing, and overstocking of inventories can lead to negative cash flow for any small or medium enterprise (SME).

When the paucity of funds has been created by dubious business strategies, the owners need to review their style of working and make required changes. Other than that, there are times when the enterprise is doing well in its industry and simply needs some additional funds to add more facilities for customers/employees, buy raw materials, develop new product features or expand the business to a new location.

A lack of adequate working capital for such steps towards growth or innovation does not imply that the business is unprofitable. It merely needs to ask for an SME loan from a formal lenders at this stage.

While there are multiple sources of any SME or MSME loan, the priority of borrowers who are keen to execute a profitable business plan or fund the expansion of their venture is to get a quick business loan for SMEs/MSMEs. They do not want to miss the opportunities at hand and search for lenders who can finance their plans in minimum time.

How to get the fastest business loan ?

In an age when digital technology is facilitating different transactions for both businesses and consumers, several non-banking finance companies have emerged as FinTech (acronym for financial technology) lenders who have condensed the loan-granting process. A FinTech company can be the source of fastest business loan for SMEs/MSMEs.

Applying for a Quick Business Loan and Its Benefits –

As a leading FinTech company offering fastest business loan for SMEs/MSMEs, Capital Float funds the growth of Pvt Ltd, Prop and LLP companies in various industries. We have an array of credit products for SME and MSME units that have robust strategies for continual progress in their domains.

To make a working capital loan accessible for more and more businesses, we at Capital Float have a simple eligibility criterion that only requires the borrowers to show a potential for growth in their industry. This efficacy can be proven with a minimum operational history of one year and a certain yearly revenue benchmark, which differs as per the nature of the business/profession, and can be checked on our website or by calling our team at 1860 419 0999.

The process of applying for our SME loan is fully digitalised, and it takes less than 10 minutes to fill in the necessary details. The relevant documents can also be uploaded online to support the information provided in the application. These generally include soft copies of papers validating business ownership, KYC documents, ITR/GST returns and recent bank statements.

Once it is submitted, we review the application on the same day, and upon approval, the requested amount is disbursed within 48-72 hours. The speedy disbursal of funds enables the borrowers to implement their business upgrade/improvement/expansion plans and advance on their profitable journey. The returns from such steps for business growth also make the repayment process stress-free.

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If you have a business plan that will take your ambitious venture to its next stage of growth, Capital Float has a quick Business loan for SMEs/MSMEs that you can use to finance it. For more information on our loans or to meet us personally, do write to us on info@capitalfloat.com

Oct 24, 2018

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Top 10 Reasons Why Private Schools Take Loans

To provide quality education, private schools in India must have cutting-edge infrastructure and well-planned facilities. This is even more important now because the generation currently in schools is growing in an environment of mobile computing devices and e-commerce. Since private institutions are entirely dependent on their own earnings to improve their campus, they may need school loans to finance such expenses.

Let us look at the top reasons that drive schools towards taking loans from banks and NBFCs:

1. To construct a new school building

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Loan for construction of school building is commonly sought by institutions that are successfully providing education services but need more classrooms to accommodate the increasing number of students. Adding more sections for each grade is also a good idea when schools are focused on keeping a low student:teacher ratio.

2. To build a playground/sports court

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School loans may also be required to add a playground, basketball courts, tennis courts or rooms for indoor sports. Games are an essential part of school education, and if a small unsecured loan from an institutional lender can help to build a beautiful playing field, the investment is worthwhile.

3. To develop a laboratory

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Schools need to have well-equipped labs for practical experiments concerning physics, chemistry, biology and to give students hands-on experience with computer studies. Some private schools are also required to have Home Science labs as per the curriculum for their students. A quick loan for school laboratory can be procured at easy terms from a FinTech lending company. Such lenders usually provide up to Rs 50 lakhs on loan for building school laboratory.

4. To buy furniture for classrooms, staffroom

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A simple reason to apply for a loan could be the purchase of new or additional furniture for students and staff. The cost of ergonomic desks and chairs may not be within the budget of the school, and financial support from a FinTech company can come in handy.

5. To purchase commercial vehicles

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Schools that provide transportation services to their students and staff may need to buy new buses or vans. If adequate finance is not available for such purchases, FinTech lenders can offer simple digital modes to provide unsecured loans with flexible repayment options.

6. To build or improve a library

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Well-stocked libraries are essential components of any school’s infrastructure. A school that has been running successfully for some time, but does not have a library, can borrow funds from school loan companies to build a quality library on its campus. Unsecured school loans can also be taken to buy stocks of new books that are too expensive to purchase in the available library budget.

7. To start a new facility on premises – stationery/canteen/uniform shop

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Private schools try to offer all the essential facilities for the convenience of students. If there is a stationery unit on the campus, students can purchase prescribed textbooks and other essential items without having to visit markets. A shop for summer and winter uniforms makes it easy to buy the exact uniform as required by the school. While canteens are not “must-haves”, they are good to provide hygienic menu options to the students and staff. School loans may be taken to fund such facilities.

8. For repairs and renovation

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A school that already has structures or facilities for education and sports may also need a loan to repair, renovate and improve them. It can digitally apply for such funds on a FinTech company’s website.

9. To purchase new teaching devices, audio-visual equipment

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School loans fund the purchase of interactive teaching devices that are becoming increasingly important in the digital age. Educational institutions can borrow to install whiteboards, overhead projectors and other audio-visual teaching aids to make learning more interesting for their students.

10. To add/improve day-boarding facilities

Some private schools offer day-boarding amenities to their students. As a part of this facility, they need to provide healthy meals and areas for rest and recreation. To build and improve such environment, they may need loans that are offered most conveniently from FinTech companies.

As a leading digital NBFC offering loans to educational institutions, Capital Float funds all such requirements of schools in India. To know more about our financing products, feel free to call us on 1860 419 0999.

Apply for Unsecured school loan

Oct 24, 2018