Pharmaceuticals
Formulation units, bulk-drug plants and contract manufacturers. From our Nashik office we work on loan licence arrangements, export refunds and GST credit, and on transactions with related parties abroad.
Last reviewed 1 October 2026
Pharmaceutical units in Nashik make formulations and bulk drugs, and a good number of them manufacture under contract or loan licence for other brands. Exports and overseas related parties are common. Free samples, expiry write-offs and shared group entities then add further entries to the same books.
The issues that arise most often are set out below, with the way we work on them from Nashik. This page describes types of work and names no clients.
The issues pharmaceutical businesses face
Pharmaceutical work in Nashik and the nearby belts covers formulations, bulk drugs and contract manufacturing for other brands. Loan licence and third-party arrangements are usual, exports are frequent, and a related company abroad is not unusual. Each of these produces its own tax consequence, and several of them may arise in a single year. The notes below are general and state the law as it stands at 1 October 2026; they should not be read as advice on any particular set of facts.
Loan licence and third-party manufacturing
A single product is often divided between two businesses. The contract decides who owns the material and who bears a loss, and it therefore decides what each invoice should carry. Where ownership and risk are left unclear, GST valuation, stock records and income recognition drift apart, and the difference usually surfaces in an audit or a departmental query some years later. Free-issue material and packing still have to appear in the challans and the stores register. Job work on pharmaceutical products may carry a lower GST rate than residual engineering job work, so the notified entry for the process should be checked.
Exports and refunds under LUT
Zero-rated supplies made under a Letter of Undertaking give rise to refunds of unused credit or of IGST, according to the route chosen. While a refund is pending, the amount is working capital the unit cannot use. A claim stalls when the shipping bill, the GST return and the bank realisation do not agree. See also the exporters page.
Free samples and gifts
Section 17(5)(h) of the CGST Act blocks credit on goods given away as free samples. In Apex Laboratories (2022), the Supreme Court held that gifts to doctors given in breach of medical council regulations are not deductible business expenditure. Sample quantities should be capable of reconciliation with the batch records and the sales ledger; where they are not, the credit reversal is usually computed by the officer rather than by the unit.
Expiry, destruction and credit reversal
Expired and damaged stock is written off, and under section 17(5)(h) of the CGST Act the input tax credit on goods destroyed or written off must be reversed. Manufacturers and stockists alike need a monthly routine for this. In its absence, the GST return, the stock register and the bank statement may diverge for months, and the reversal then carries interest.
Group entities and common costs
A frequent structure in Nashik combines a manufacturing company, a loan-licence firm and a selling entity, with rent, job-work charges and head-office costs passing between them. Rule 28 of the CGST Rules governs the valuation of supplies between related persons. Where the units hold separate registrations, common credit is distributed through an Input Service Distributor registration, which has been compulsory since 1 April 2025.
How we work with pharmaceutical businesses
The first document we read is usually the contract that divides the product. In other cases the export refund file or the sample and expiry registers come first, depending on where the difficulty lies.
GST on contract manufacturing and credit
Invoice formats are designed for loan licence and third-party work, and credit is reconciled against them. We compute sample and expiry reversals and draft replies to notices. See GST.
Export refunds and working capital
The LUT route and the refund workings are prepared, with shipping documents, returns and bank realisation matched line by line. Stock and debtor statements for the bank are drawn from the same figures.
Transfer pricing
For groups with a foreign link, we set arm's length prices, prepare the documentation and issue the accountant's report. See transfer pricing.
Income tax for the business and promoters
Year-end tax computation and tax deducted at source are handled, as are assessments and notices. See taxation.
Costing and MIS
Where the records support it, cost is analysed by product and by batch, and the owners receive monthly MIS. See manufacturing finance and business advisory.
Pharmaceuticals in and around Nashik
Formulation and bulk-drug units in Ambad and the other Nashik estates operate beside engineering and electrical plants, and many are tied to larger brands through contract manufacturing. Because export work and overseas related parties are common here, transfer pricing and refunds tend to arise in the same year as routine GST compliance.
Related pages cover manufacturing, exporters and family businesses. We visit clients in Nashik district, and we work with clients in the pharmaceutical belts around Pune and Chhatrapati Sambhajinagar from our Nashik office (Maharashtra).
Where we are a company's statutory auditor, section 144 of the Companies Act, 2013 limits the other services we may provide to that company and to its holding or subsidiary company.
Common questions
We manufacture under a loan licence. Who should issue the GST invoice?
The answer depends on who supplies what under the contract. The party that supplies the goods to the market invoices the customer. Job work or contract manufacturing charges between the two businesses need separate invoices, and the documents should state who owns the material at each stage. The contract is read first; the invoice format is settled after.
Can we claim GST credit on free samples given to doctors?
Section 17(5)(h) of the CGST Act blocks credit on goods given away as free samples. The income tax deductibility of promotional gifts is a separate question, and it turns on the facts and on the applicable professional regulations.
Our refund of accumulated credit is delayed. What should we check first?
The shipping bill, the GST return, the refund application and the bank realisation should be compared with one another. Queries on a claim usually arise from a gap in that chain. The stock and credit ledgers must also agree with the return on which the refund rests.
Our overseas distributor is a related company. What extra work is required?
Transactions with associated enterprises require arm's length pricing and transfer pricing documentation. Where the thresholds are met, the accountant's report under the Income-tax Act, 2025 is also required. An export invoice to a related buyer does not by itself satisfy either requirement.
Other industries: Manufacturing, Exporters, Family businesses
Where we work: Chartered Accountants in Nashik, Chartered Accountants for businesses across Maharashtra