The Hindu Business Line : AP drug traders' body seeks exemption from VAT

THE Federation of Drug Traders of Andhra Pradesh has urged the State Government to follow the example of West Bengal and a few other States and exempt the drug trade from the VAT Act coming into force from April, "as otherwise the implementation of the act will give rise to many anomalies and practical difficulties."

Mr D. Krishna Reddy, General Secretary of the federation, and Mr Madhusudana Rao, founder-president, said at a press meet here that the druggists and chemists in the State, numbering over 37,000, had sent representations to the State Government, but the response had not been positive so far.

Explaining their position on the issue of VAT, they said they were not opposed to the imposition of VAT per se, but the drug trade presented a peculiar case.

"Under the VAT Act, the drug traders have been divided into three categories - those having a turnover of below Rs 5 lakh, those in the range of Rs 5-40 lakh and those over Rs 40 lakh. Only the third and last category is covered under the VAT Act. As 70 per cent of the chemists and druggists in the State fall into the first two categories, a wrong impression is created that the drug trade is not much affected, but that is not true," they said.

The crux of the problem, according to them, lay in the fact that the druggists were obliged to follow the Drug Prices Control Order passed by the Union Government which would allow them to collect all taxes paid, but under the VAT Act it was illegal.

"If a piece of legislation passed by the State Government is in contravention of a law passed by the Union Government, we are obliged to follow the central act. To overcome the problem, States such as West Bengal have decided to exempt the trade from the purview of VAT Act and impose single-point taxation at the level of manufacturer. We want the Andhra Pradesh Government to follow suit," they said.

They said that the small non-VAT dealers (those in the range of Rs 5 lakh to Rs. 40 lakh) would have to pay one per cent on the turnover, but in fact the burden would be much more, as they would not be entitled to collect taxes already paid.

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