High taxes push Punjab pharma units to the edge

At least 95 per cent of the pharmaceutical units in Amritsar are not functioning to capacity because of high taxes [16.32 per cent excise and 4 per cent Central Sales Tax (CST), both on purchase and sales].

However, Himachal Pradesh, which is a tax-free zone and the units are exempted from excise duty, sales tax etc, is doing much better. Experts believe the pharmaceutical units, not only in Amritsar but in entire Punjab, have already cut down the production by 35-40 per cent and are struggling to survive due to cut throat competition.

To avail of the tax incentives about 75 per cent of units, located across India, have already shifted to Himachal Pradesh.

According to experts while almost 75-80 per cent of the pharmaceutical units of Punjab had already migrated to Himachal Pradesh to avail of the tax incentives, the remaining units were struggling hard to survive.

A high tax which is about 24 per cent, including16.32 per cent excise duty and 4 per cent CST, each on purchase and sales, has affected sales in Punjab.

The units have cut down production by 35-40 per cent, due to cut throat competition and high input costs, which make the products expensive in Punjab as compared to Himachal Pradesh. Thus buyers prefer to go to Himachal Pradesh. of Punjab.

At present there are 33-35 units in Amritsar. Amritsar-based Marvel Medilinks have manufacturing capacity of one lakh tablets, 50,000 capsules and 200 litres of liquid per day. Marvel Medilinks Director Reena Blaggan told Business Standard, "We had already cut down the production by 35 per cent because buyers preferred Himachal where the product was cheaper due to tax incentives. The situation here is quite grim here."

She had planned to set up injectable unit in Amritsar but later gave up the idea because of high taxes. She added, "About six years back ,after Delhi, Amritsar used to be the pharmaceutical hub in northern India but due to tax incentives in Himachal, most of the units shifted to Baddi and as a result it has emerged as the pharmaceutical hub."

In order to revive the ailing pharmaceutical units, she suggested, "The government should bring down the excise duty to 8 per cent from 16.32 per cent. Secondly CST should be abolished. Thirdly, the excise limit for the small scale industries should be raised from Rs 1 crore to Rs. 5 crore, so that we can compete in the market."

Jakson Laboratories Managing Director Jugal Kishore said, " The government must lower down the excise duty to 8 per cent, otherwise the units would close down."