VAT-less UP loses out in drugs trade

Lower 4% VAT in surrounding states hits business

Agra is known to be one of the largest markets for medicinal drugs and formulations in North India, grossing a monthly business of almost Rs 120 crore in the trading of medicines alone.

But with UP being left behind the rest of the states in the country in adopting VAT as a uniform taxation system for businesses, this booming market is now witnessing a major slack in business.

Faced with a trade tax of 8 per cent and an additional 1 per cent UP state development tax, against the uniform 4 per cent VAT in the rest of the states, the UP medicine market, which is primarily governed by Agra, has begun to experience difficulties in marketing the drugs at a higher price than in the neighbouring states, prompting the medicine traders of the state to go on a symbolic one day strike this week.

The medicine market of Agra, which is located at the borders of four states - Delhi, Haryana, Madhya Pradesh and Rajasthan, is especially facing these problems as the import of medicines into the state had suddenly become costlier by 4 percent, with the stockists not getting a refund on the VAT paid by them on the consignments imported from other states while earlier, they could easily import the medicines on a Form "C".

According to the market sources, this factor had ultimately resulted in a slowdown in the market and while in the previous financial year, the gross takings of the market were pegged at around Rs. 4-5 crores a day, they had suddenly dropped down to almost Rs. 3 crores a day in the past week alone.

Besides, with the prices being lower by 5 percent in the adjoining state, just 50 kms. across the border into the neighbouring states, the entry of smuggled drugs into the market was also making the ground shaky for the stockists of genuinely imported medicines.

The proportion of these smuggled drugs amounted to almost 35-40 percent of the total medicine sales these days, sources claimed, causing a loss of business in the tune of about Rs. 40-45 crores in a month to the traders.

Citing the vast difference in the tax rates between the neighbouring states and Uttar Pradesh as the sole reason behind the recent market slowdown, the medicine traders of UP have decided to hold a symbolic one-day strike this week, in order to raise this issue before the UP Chief Minister and ask him to either drop the trade tax rates on medicines to 4 percent or show a green flag to the entry of VAT in this state too.