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GST 2.0 is emerging as a significant advantage for Sikkim's pharmaceutical, tourism, and tea industries.

New Delhi, Sept 24 (NationPress): For Sikkim, a small Himalayan state engaged in pharmaceuticals, tourism, and organic food products, the GST 2.0 rate reductions will enhance the cost-competitiveness of these vital sectors, fostering increased demand and broader market access. These reforms are expected to improve local livelihoods, elevate export levels, and stimulate the state's economic development.

The reduced GST rates applicable to hospitality and wellness services will provide a boost to the tourism sector, facilitating job creation within the hospitality industry. Furthermore, the introduction of zero GST on cancer medications and lowered rates on other pharmaceuticals will significantly enhance the production and export capabilities of the pharmaceutical sector.

Specialty products such as Temi tea and Dalle chilli produced in the state will also see decreased prices, enhancing both domestic and international market access.

The tourism sector is crucial for Sikkim’s economy, with a diverse array of hotels, homestays, travel agencies, taxi services, guides, and eateries contributing to local income and job opportunities. Approximately 7.8 lakh individuals depend on this sector for their livelihoods. Popular destinations like Kanchenjunga National Park, Lachen, Lachung, and Yumthang Valley continue to draw increasing numbers of tourists, while Gangtok has been recognized by the Government of India as the “Safest Tourist Destination.”

With the new GST structure, hotel rates up to ₹7,500 per night will now incur only a 5 percent GST. This decrease effectively returns funds to tourists, encouraging greater occupancy rates and extended stays, which in turn leads to more job opportunities in the hospitality sector.

Another transformative tax reduction is the lowering of GST on beauty and wellness services from 18 percent to 5 percent. Known for its wellness tourism, Sikkim hosts numerous traditional and herbal medicinal centers. With a mere 5 percent GST now in place, wellness tourism packages have become considerably more affordable.

Encouraging tourism through tax incentives will further diversify Sikkim’s economy and uplift rural communities. An increase in tourist arrivals will not only enhance state GST collections through greater volume but also positively impact related sectors such as transport (vehicle rentals), agriculture (local organic produce demand), and handicrafts (souvenir sales).

Sikkim has also established itself as a pharmaceutical manufacturing hub, hosting over 50 pharmaceutical companies, including industry leaders like Sun Pharma, Cipla, and Zydus Cadila, primarily located in East Sikkim. The pharmaceutical sector has thus become a significant employer within the state.

The GST reforms eliminate or drastically reduce taxes on medicines and medical devices, lowering costs throughout the pharmaceutical supply chain. Specifically, 30 cancer medications now enjoy full GST exemption (down from 12 percent), while GST on all other drugs is reduced from 12 percent to 5 percent. Similarly, most medical and surgical devices, including thermometers and medical apparatus, now attract only a 5 percent GST. This translates to a 7-13 percent reduction in tax burden, improving healthcare affordability with medications becoming significantly cheaper.

A major advantage for Sikkim’s pharmaceutical producers will be the enhancement of export competitiveness and market expansion. Drug formulations, biologicals, and medical & scientific instruments account for approximately 63 percent of the state’s total exports, reaching markets in Europe, the Middle East, Nepal, and Japan. With GST reduced to 5 percent or even zero on these items, exporters from Sikkim will experience a lighter tax burden, effectively lowering production costs and allowing for more competitive pricing in global markets.

Sikkim’s Temi estate’s tea is highly sought after in international markets, including the USA, Germany, the UK, and Japan. Though modest in size, employing around 450 workers, its impact is significant in terms of brand value and rural livelihoods in the Namchi district.

For Temi Tea, which has been expanding its domestic presence, the GST reduction from 18 percent to 5 percent allows for deeper market penetration with improved pricing strategies. The export potential of Sikkim’s tea is likely to benefit as prices fall, resulting in better earnings for workers and small producers.

Sikkim is also home to a diverse food processing ecosystem, with bakery, snacks, and confectionery products produced in Pakyong, while Soreng is known for its meat-based products. Mangan is famous for large cardamom, and Gangtok produces the well-known Dalley Khorsani chilli, a GI-tagged product.

The recent GST reforms significantly enhance cost efficiency by reducing tax rates on essential items. Pickles, fruit, and vegetable juices now incur only a 5 percent GST instead of 12 percent, while products like pastries, cakes, soups, and broths see reductions from 18 percent to 5 percent. This leads to lower shelf prices by 6-13 percent, driving higher consumer demand and encouraging more extensive procurement during peak seasons.