Drug manufacturers resent tax holiday in 3 states
Ruchika M. Khanna
Tribune News Service

Chandigarh, September 4
Drug manufacturers in Punjab and Haryana are up in arms against the decision of the Central Government to extend the sunset clause for tax holiday in the hill states of Himachal Pradesh, Uttaranchal and Jammu and Kashmir.

These drug manufacturers have pleaded that this would mean death knell for drug industry in the two states, especially as Punjab and Haryana were land-locked between the three hill states enjoying tax holiday.

"For the past 18 months, we have been crying for justice upon being slapped with a 40 per cent excise duty, under the MRP-based Excise Notification (since January 2005), which also truncated our Small Scale Industry exemption of Rs 1 crore to one third overnight.

This MRP-based excise regimen is specific to the pharma sector only. Now, this has added insult to injury, with extension of sunset clause of tax holiday states by three years," said Mr Jagdeep Singh, President, Punjab Drug Manufacturers Association.

Talking to TNS here today, he said the association also submitted a memorandum to the Prime Minister, Dr Manmohan Singh, last week. "More than 55 per cent of the total pharma production has already shifted to the three tax exempt states. By the end of this fiscal, almost 60 per cent of pharma production would have shifted to these three states. Now that the sunset clause has been extended, there will be no stopping the further exodus of industry," he said.

It is estimated that about 80 per cent of the pharma industry has already shifted out of the two states to Himachal, as there is a 40 per cent disparity in taxes between the tax exempt and non-tax exempt states.

Also, no new pharma units have been set up, or expansion of the existing units taken place in Punjab and Haryana.

There is also a lurking fear that if units shut down in non-tax exempt states ( because of being unviable owing to a magnified disparity caused by MRP-based Excise), the country will also lose the capability to provide medicines to consumers at the lowest price in the world.

With major pharma production migrating to tax holiday states, drugs produced in these states is not under pressure of MRP-based excise. As a result, increase in MRPs for profiteering and to woo the traders is a disturbing trend by units in these states.

Source: www.tribuneindia.com
5th September 2006

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