Financial Daily from THE HINDU group of publications
Friday, Apr 25, 2003
Financial Daily from THE HINDU group of publications Friday, Apr 25, 2003 |
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Taxation Industry & Economy - Pharmaceuticals 4 pc VAT rate: Will it mean cheaper drugs? P.T. Jyothi Datta
NEW DELHI, April 24 IF anyone, it is the consumers who should be heaving a sigh of relief on the decision to impose a four per cent VAT on all medicines. Its earlier suggestion of 12.5 per cent had raised the hackles of the pharma industry — though it would have been the consumers who would have had to bear the brunt of a price increase, with companies simply passing on the burden to the latter. Nevertheless, the pharma industry forums are optimistic that the present balance of medicine prices would not be upset and consumers may in fact end up paying less in some States. Mr G. Wakankar, Executive Director of the Indian Drug Manufacturers' Association (IDMA), pointed out that medicine prices could well be less in States that have a higher sales tax at present. The sales tax in Maharashtra is 9 per cent, Gujarat 8 per cent, West Bengal, Delhi and Uttar Pradesh 8 per cent and Jammu and Kashmir is charging the highest at 12.5 per cent. "This could result in less revenues for the respective State Governments, but consumers are definitely beneficiaries." Last evening's decision by the Empowered Committee of State Finance Ministers was in line with recommendations made by the different pharma representatives. "We had pointed out to the authorities that an imposition of 12.5 per cent would translate to Rs 1,282 crore additional levy on medicine alone. But a four per cent VAT would mean a loss of only Rs 185 crore," Mr D.G. Shah, Secretary-General, Indian Pharmaceutical Alliance (IPA), told Business Line. A decrease in medicine prices may not be likely, points out Mr B.K. Raizada, Ranbaxy's Senior Vice-President. According to him, the imposition of 4 per cent VAT would have a "neutral" impact on pharma companies across the board and subsequently there would be "no added impact" on the consumer. A further reduction could be on the cards, if VAT on life-saving drugs is brought down further. The industry's representation has been to bring down the VAT rate to one per cent.
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