The Hindu : New Delhi News : “Pharma firms in non-tax holiday States hit by excise duty”

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Sunday, Feb 17, 2008
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“Pharma firms in non-tax holiday States hit by excise duty”

Bindu Shajan Perappadan

NEW DELHI: A group of small and medium scale pharmaceutical enterprises has complained to the Union Chemicals, Fertilizers and Steel Ministry about the Government’s excise duty policies on the pharmaceutical industry located outside the tax-exempt States.

In 2005, the Government imposed excise duty on the Maximum Retail Price of manufactured drugs, which when compounded with the excise exemption available in some States including Himachal Pradesh and Uttaranchal left several small and medium manufacturing units outside the tax-exempt States uncompetitive and is now practically edging them out of business.

It has also badly hit the 10 lakh people employed in the sector, complain representatives of small and medium scale pharmaceutical enterprises.

“Companies supplying drugs manufactured in the tax-exempt States stand to gain because their products are preferred by traders and retailers as they get larger margin with the drugs being excise-free,” said Jagdeed Singh, Secretary-General of the Confederation of Small and Medium Pharma Enterprises.

“Small and medium enterprises in tax non-exempt States feel deprived as two-thirds production is sourced from tax holiday States today. It is a boon especially for large industry which makes good its investment of new units in a matter of months owing to tax savings on huge turnover”

What has added to the imbalance in the industry and deficit in business for small and medium sector pharmaceutical units is the large-scale shift to tax-exempt States mainly by large units as also some small and medium scale units.

A letter by Union Chemicals, Fertilizers and Steel Minister Ram Vilas Paswan to the Prime Minister on the subject notes: “Apart from the physical shifting of industry there has also been a shift in outsourcing/contract manufacturing to these tax-exempt States.

“Several others [mostly small-scale units which could not shift have been forced to curtail their operations].” The Minister in his letter has demanded that the Government consider a review of the excise duty regime for the non-tax exempt States.

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