Currently, Delivery Charge is shown as “E SHOP SHIPING CHARGE” and is covered under HSN Code — 30049099 — this HSN code is reserved for Pharma products. Is current implementation legal?
Whether they are shipping non-pharma products under the same HSN. Further, since HSN code 30049099 is only applicable for “pharma products”, the same HSN code cannot be used under delivery “E-SHOP Shipping Charge since shipping is a service and not products.
For shipping, the following codes will be applicable and can be implemented- 998540 (Packaging services for goods); 996813 (local delivery charges).
- adding 1 more line item in the invoice — “PACKAGING, HANDLING CHARGE”. Whether it will have same HSN code or will it have SAC Code?
As far as packaging is concerned, it will be borne by the SAC code and not the HSN code. The SAC code for the packaging is: SAC 998540 Packaging services of goods for others.
- For creating a service in invoice — PACKAGING, HANDLING CHARGE — what should You keep as MRP for this as the value can vary from INR 10 – 100?
Since it is concerned with creating a service in delivery, it is a charge which is applicable considering it should be charged based on outside variable instead of fixed rate.
Our Analysis of applicable laws:
HSN CODE OR SAC CODE
HSN (Harmonized System of Nomenclature) and SAC (Services Accounting Code) are two classification systems used for the taxation of goods and services in India. HSN codes are used for the classification of goods and SAC codes are used for the classification of services. In the sale of drugs and medicines, HSN codes are used to classify the products based on their nature, composition, and other characteristics, while SAC codes are used to classify the services related to the sale of drugs and medicines. The HSN code for drugs and medicines falls under chapter 30 of the GST (Goods and Services Tax) tariff, which covers pharmaceutical products. The HSN code for a particular drug or medicine depends on its composition, dosage form, and other characteristics. The SAC code for the sale of drugs and medicines is 9984, which covers the services related to the sale of pharmaceutical and medical goods, including dispensing of prescriptions, retail sale of medical and orthopedic goods, and other related services.
SECONDARY PACKAGING COST
As per Para 2(r) of the Drugs (Prices Control) Order, 2013 (DPCO), the Maximum Retail Price (MRP) of a drug includes all costs associated with the manufacturing, distribution, and marketing of the drug. This means that the MRP of a drug is inclusive of all taxes, duties, packaging costs, and other expenses incurred by the manufacturer or importer of the drug. However, the DPCO does not explicitly mention whether delivery charges are included in the MRP of a drug or not. Therefore, there is some ambiguity regarding whether delivery charges can be included in the MRP of a drug. In general, the MRP of a drug is the maximum price at which the drug can be sold to the end consumer, and any charges in addition to the MRP may be considered as additional charges or fees.
CASH MEMO /Invoice
The requirements for cash memos for the sale of drugs and cosmetics are specified in Rule 65 of the Drugs and Cosmetics Rules, 1945; under ‘Conditions of License’. The following are the requirements for cash memos issued in relation to the sale of drugs and cosmetics:
- Name and address of the seller
- Name and address of the purchaser
- Date of the transaction
- Serial number of the cash memo
- Name of the drug or cosmetic
- Quantity of the drug or cosmetic sold.
- Price charged for the drug or cosmetic.
- Batch or lot number of the drug or cosmetic
- Expiry date of the drug or cosmetic, if applicable Statement “Not for resale” in case of drugs or cosmetics not intended for resale
In addition, the cash memo should be in duplicate, with the original copy given to the purchaser and the duplicate copy retained by the seller for a period of at least two years from the date of the transaction. The cash memo should also be maintained in a legible manner and should not contain any erasure, overwriting, or correction, except for corrections made by the seller at the time of the transaction.
Para 25 of DPCO, 2013. Display of prices of non-scheduled formulations and price list thereof. – (1) Every manufacturer of a non-Scheduled formulation intended for sale shall display in indelible print mark, on the label of container of the formulation and the minimum pack thereof offered for retail sale, the maximum retail price of that formulation with the words “Maximum Retail Price” preceding it and the words ‘inclusive of all taxes’ succeeding it.
(2) Every manufacturer shall issue a price list and supplementary price list, if required, of the non-Scheduled formulations in Form-V to the dealers, State Drugs Controllers and the Government indicating changes, from time to time.
(3) Every retailer and dealer shall display the price list and the supplementary price list, if any, as furnished by the manufacturer or importer, on a conspicuous part of the premises where he carries on business in a manner so as to be easily accessible to any person wishing to consult the same.
Para 26 of DPCO. Control of sale prices of formulations. – No person shall sell any formulation to any consumer at a price exceeding the price specified in the current price list or price indicated on the label of the container or pack thereof, whichever is less.
Para 27 of DPCO. Sale of split quantities of formulations. – No dealer shall sell a loose quantity of any formulation at a price which exceeds the pro-rata price of the formulation.
Para 28 of DPCO. Manufacturer, distributor, or dealer not to refuse sale of drug. – Subject to the provisions of the Drug and Cosmetics Act, 1940 (23 of 1940) and the rules made thereunder, –
(a) no manufacturer or distributor shall withhold from sale or refuse to sell to a dealer any drug without good and sufficient reasons;
(b) no dealer shall withhold from sale or refuse to sell any drug available with him to a customer intending to purchase such drug.
Drug Policy of 2012: One of the key objectives of drug policy 2012 issued by NPPA is to availability of drugs at a reasonable cost. This is achieved by regulating of MRP of scheduled drugs and monitoring of MRP of non-scheduled drugs.
As per the Covid Notification Doorstep Delivery Section 26B and Section 65, once the order is placed by the consumer, the bill, or the cash memo (with order ID, name & address of the patient, quantity price, tax deduction, etc.) shall be sent by the return email and records of all such transactions shall be maintained by the licensee.
NPPA DECLARATION FORMS
The requirement of Schedule-II Form V proforma for price list is mentioned in paragraphs 2(x), 24, 25, and 26 of the Drugs (Prices Control) Order, 2013 (DPCO). These provisions outline the various requirements that manufacturers and importers of drugs in India need to follow when submitting their price list to the National Pharmaceutical Pricing Authority (NPPA) through the proforma. The above requirements are important to ensure transparency in drug pricing and to prevent overpricing or underpricing of drugs. The NPPA uses this price list to monitor drug prices and to ensure that drugs are sold at reasonable prices to the end consumer. Any violations of these requirements can lead to penalties and legal action under the DPCO. The key requirements of Schedule-II Form V proforma for price list are as follows:
- Name and strength of the drug: The proforma requires manufacturers and importers to provide the name and strength of the drug they manufacture or import.
- Dosage form: The proforma requires manufacturers and importers to specify the dosage form of the drug, such as tablet, capsule, injection, or syrup.
- Maximum retail price (MRP): The proforma requires manufacturers and importers to provide the MRP of the drug, which is the maximum price at which the drug can be sold to the end consumer.
- Excise duty: The proforma requires manufacturers and importers to specify the excise duty applicable to the drug.
- Packing size: The proforma requires manufacturers and importers to specify the packing size of the drug, such as 10 tablets, 100 tablets, or 1 bottle of 200 ml syrup.
- Batch number and date of manufacture: The proforma requires manufacturers and importers to provide the batch number and date of manufacture of the drug.
- Wholesale price: The proforma requires manufacturers and importers to provide the wholesale price of the drug, which is the price at which they sell the drug to wholesalers.
Delivery charges of e-pharmacy do not fit directly in Schedule-II Form V proforma for price list as it is not a component of the price of the drug. The proforma requires manufacturers and importers to provide the maximum retail price (MRP) of the drug, which is inclusive of all costs associated with the manufacturing, distribution, and marketing of the drug.
License to sell wholesale/retail drugs under Drugs & Cosmetics Rules, 1945: The license to sell class of drugs are issued in Forms 20,21, 21A, 24, 24A etc. are based on physical premises of pharmacy and it is restricted to the area mentioned in the license. There are no provisions in the Drugs and Cosmetics Rules, 1945 for shipping of drugs within an area or country by retailer. The licenses permit sell and dispense of drugs by a pharmacist directly to a patient or consumer against a prescription. If legislature had thought of shipping of drugs within a country by a retailer, then licenses would not have been granted local area wise by a state FDA.
Though, the DPCO 2013 does not expressly prohibit shipping charges and secondary packaging charges, NPPA may take a different view on overall cost of drug price through retail sale when other charges are added to cost of MRP of a drug.
Conclusion: In the absence of prohibition on delivery charges and service charges on the sale of drugs via carrier within the specified licensed area of pharmacy is permitted, however the invoice should be transparent to show the service charges and delivery changes by maintaining the MRP of a drug.
The invoice must contain the information as per Rule 65 of the Drugs and Cosmetics Rules, 1945; under ‘Conditions of License’.:
- Name and address of the seller
- Name and address of the purchaser
- Date of the transaction
- Serial number of the cash memo
- Name of the drug or cosmetic
- Quantity of the drug or cosmetic sold
- Price charged for the drug or cosmetic
- Batch or lot number of the drug or cosmetic
Further, delivery and service charges can be added to the invoice after the MRP of drugs. However, as per the amended Consumer Protection Act express consent by checking the box before placing the order must be taken by the company.
“I agree to pay delivery and service charges for my order “