Chemicals ministry preparing Cabinet note seeking excise at 8 % in pharma sector
Joseph Alexander, New Delhi

The Union Chemicals and Fertilisers Ministry is preparing a Cabinet note to recommend slashing of excise duty from the current rate of 16 per cent to 8 per cent on all pharma products, in line with the long standing demand by the pharmaceutical industry to help pass on the benefits to the common man.

Sources in the Ministry said the Chemicals Department had started working on the note that would be sent to Commerce and Finance Ministries for comments and then to the Cabinet for a final decision. The details were being collected to support the cut in the excise duty on pharma products, sources added.

However, it is too early to know what stand the Finance Ministry would take on the proposal this time around. Because, the Finance Ministry had already shot down a similar recommendation by the Parliamentary Committee in this regard sometime back, citing huge losses to the national exchequer.

Sources said that the Chemical Ministry is making a strong proposal this time in favour of cutting down the duty and would press for the same in the Cabinet when the note would come up in a month's time, irrespective of a possible objection by the Finance Ministry.

The industry, especially the small scale sector, has been demanding a positive approach from the Government by reducing the present excise duty so that the benefits could be directly passed on to the consumers with lower prices on the drugs. They claimed that cut in the excise rate would be the best possible option to curb the prices of drugs in the markets. The pharma associations have been lobbying for the same for a long time now.

However, the Chemicals Ministry is still apprehensive if the drug makers would pass on the benefits and hence the Department would also suggest some mechanism to make sure that the prices of drugs were brought down.

The Finance Ministry, which held up the proposal to withdraw tax exemption to the contract manufacturers in the excise-free zones, is expected to take a lenient stand this time on the issue of excise duty as it would be helpful to the entire industry.

The Finance Minister earlier refused to accept the recommendation by the Parliamentary committee to cut the excise duty to 8 per cent, holding that it would cause loss of at least Rs 1000 crore. According to the estimates, the excise duty on pharma products rakes up around Rs 2000 crore every year.

Source: www.pharmabiz.com
31st October 2007

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