Chemicals ministry may impose 8 % excise on pharma units in hill states
Ramesh Shankar, Mumbai

In an effort to reduce the huge disparity between the excise exempt states and others, the Union chemicals ministry is working on a proposal to either impose 8 per cent excise duty in exempt states or to reduce the existing 16 per cent excise duty in non-exempt states to 8 per cent.

According to sources, the chemicals ministry has already prepared a proposal in this regard and the proposal is lying with the minister Ramvilas Paswan. Once the minister puts his seal on the proposal, it will be sent to the cabinet committee on economic affairs (CCEA) for the final approval. Though it is some time the proposal has been worked out, the minister is under tremendous pressure not to take any hasty decision on this tricky matter. Hence the delay, sources added.

Though the proposal will provide to a large extent a level-playing field to the industries, especially small industries, functioning in the non-exempt states, a large number of units established in the hill states of Himachal Pradesh and Uttarakhand will lose much of its attraction as they are now enjoying total excise duty exemption.

If the government imposes 8 per cent duty in the tax exempt states and retain the same 16 per cent to the non-exempt states, it will act as a deterrent from putting exorbitant MRP on medicines as they have to pay 8 per cent duty to the government. Presently, there are complaints of drug companies putting MRP at their whims and fancies to please the traders. In some cases there are reports of drug companies giving 1000 per cent trade margins to the trade. Once the government corrects the tax anomaly, it will act as deterrent to such activities, sources said.

That the government is serious about taking some action in the tax exempt states is evident from the fact that the government had recently withdrawn excise exemption for peripheral units in these states. Many in the industry watch this government action as precursor to further action.

Source: www.pharmabiz.com
18th February 2008

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