The pharmaceutical industry has given an assurance to traders that the latter would get a set-off on financial losses incurred due to implem...
Written by Ajay Jain
New Delhi |
3 min read
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The pharmaceutical industry has given an assurance to traders that the latter would get a set-off on financial losses incurred due to implementation of value added tax (VAT). The traders on their part have promised that there would be no shortage of medicines in the market.
This was decided in a joint meeting of the Indian Drug Manufacturers Association (IDMA), Organisation of Pharmaceutical Producers of India (OPPI) and All India Organisation of Chemists and Druggists (AIOCD) held recently. It was also decided that no steps would be taken in panic since draft rules on VAT vary from state to state and the actual rules in some states are different from those circulated.
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IDMA has urged the empowered committee of state finance ministers to charge VAT on all drugs and pharmaceuticals at 4 per cent. At present, there is a proposal to levy this rate only on certain life saving drugs, while the rest would be charged at 12.5 per cent. IDMA has estimated that the drug prices would go up by 6 per cent on an average if the 12.5 per cent VAT is charged. This rate is higher than the average sales tax charged across various states. It has also stated that with no consensus arrived yet on which drugs would come under the 4 per cent category, it will be in public interest for the ministry of health to recommend 4 per cent VAT on all pharmaceutical formulations. OPPI and IDMA, which represent a majority of pharma manufacturers in the country, assured the chemists’ body that taking into consideration the actual rules on VAT, as and when announced, wholesalers would get a set-off on goods lying with them. While March 31 was to be considered as the date for which goods in stock would be entitled for this benefit, sources said that such assurances would be extended to any future date set for VAT roll-out.
AIOCD on its part said it would ensure that there was no shortage of medicines in the market. It has also stated that there will be no return of goods other than excessive inventory in value terms as defined in agreement between the trade and industry.
IDMA has also asked for modification of norms for maximum retail price (MRP) marking on medicine packages. The current practice of ‘MRP excluding local taxes’ results in differential pricing and confusion which can be avoided if MRP includes all taxes as in the case of consumer goods. It has been suggested that this can be facilitated if all states introduce uniform rates of local taxes.
