SSI pharmas may get excise cut placebo

NEW DELHI: The Prime Minister’s economic advisory council has recommended that the burden of excise duty on small-scale companies should be eased by making the 16% excise duty on medicines applicable only on 40% of the maximum retail price (MRP) as against the 60% of MRP now. Finance minister P Chidambaram is likely to consider this while finalising his Budget recommendations.

Many small-scale companies had to shut down and a few had to move to excise exempt in the recent past after the government started levying excise on the MRP instead of on the ex-factory price early last year. Following the move, many bigger players stopped hiring small companies in states like Maharashtra and Gujarat for manufacturing services in favour of the companies that has facilities in excise exempt states. There are about 8,000 manufacturers involved in the production of drugs in the small scale sector.

The finance ministry, however, shot down a proposal from the chemicals and fertilizers ministry to increase the excise exemption limit of Rs 4 crore to Rs 5 crore for SSIs. Small scale entrepreneurs in the sector will be eligible for excise duty exemption on a turnover upto Rs 4 crore only unless the situation is reviewed in the budget.

A proposal to reduce the excise duty for the small scale sector from 16% to 8% has been shot down by the finance ministry on the grounds that this will need to be extended to the entire sector and not just small scale entrepreneurs.

If the proposal goes through, the exemption will be allowed under paragraph 25 of the Drug Price Control Order (DPCO) of 1995, which empowers the government to grant exemptions to a category of manufacturers from any of the provisions laid down in the DPCO. This may be based on the number of employees, capital invested, sales turnover, range or group of products and the production of new drugs or bulk drugs.

Source: Economic Times
15th December 2006

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