GST Council allows pharma ITC on free samples and expired drugs from FY28

The GST Council approved changes allowing pharmaceutical companies to claim input tax credit (ITC) on free samples and medicines destroyed or written off after expiry, effective from fiscal year 2027-28, alongside refund reforms to ease working capital pressures. The Council, chaired by Finance Minister Nirmala Sitharaman, approved the proposal on Thursday to rationalize ITC and refund rules for the sector, supporting manufacturing, liquidity, and exports. The changes address long-standing GST issues, particularly for manufacturers of formulations, vaccines, biologics, and diagnostics, where sampling and regulatory disposal are common. Experts called the decision a "double-dose GST booster," noting the ITC unlock ends a tax hit on inventory law requires discarding. Proposed inclusion of input services and capital goods in inverted duty refund computations could improve cash flows and working-capital efficiency for manufacturers and exporters.