The finance ministry is considering a proposal to exempt locally produced life saving drugs from paying excise duty, or to impose a countervailing duty (CVD) on imported drugs. Imported drugs which can be categorised as life saving are currently exempted from paying customs duty.
The proposal, moved by the ministry of chemicals and petrochemicals seeks to redress the domestic industry's complaint that locally produced life saving drugs are at a disadvantage vis-a-vis imported drugs.
Manufacturers of life saving drugs in India have to pay an excise duty of 15 per cent on the product.
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This puts them at a cost disadvantage vis-a-vis imported drugs, which are not only exempt from paying customs duty, but are also not required to pay any excise duties locally.
The Indian pharma industry had been demanding that the government impose a countervailing duty on imported drugs to ensure parity in the market.
In a note sent to the finance ministry, the department of chemicals and fertilizers has mentioned the two options. "Waiver of excise duties would benefit the consumers and since the revenues from this category are not large enough to make a dent on the government's resources, it should not be a problem," said an official.
The other option is to impose an equivalent duty on imported life saving drugs. However, the problem there would be that a CVD would push up the cost to the consumer, said officials.
Life saving drugs need to be taken over long periods of time and also, it is not possible for patients to switch medications frequently. This means that cost of treatment can go up astronomically, they add.
In addition, it has also proposed that customs duty exemptions should only be given if importers are willing to subject the drugs to price control and pass on the benefit of duty exemption to consumers.
If the exemption is withdrawn and a CVD is imposed, it would push up the cost of these drugs sharply, say officials.