More taxes for drug firms in new regime

The Indian pharmaceutical industry says it might end up shelling out an additional Rs 1,000 crore in taxes and trade margins with the new excise regime based on the maximum retail price coming into force from July 1.

These extra payouts come from a higher level of MRP (on account of local tax inclusion) on which excise and other charges are calculated.

Excise duty alone, which has been calculated on MRP since early last year, will involve an additional payout of Rs 139.2 crore while the trade margins "" 10 per cent to wholesalers and 20 per cent to retailers on drugs outside price control "" will account for Rs 362.4 crore.

At present, the pharma sector is allowed 40 per cent abatement and pays 16 per cent excise duty on 60 per cent of the MRP.

The figures have been calculated on the domestic trade sales of Rs 24,000 crore, assuming a 6 per cent rate of local taxes.

The second component of the burden is the sales tax operative in Uttar Pradesh and Tamil Nadu, which are still not on the VAT regime. The sales tax rates here, are 9 and 10.5 per cent, respectively.