Life saving drugs likely to draw 4% VAT

Life savings drugs could attract VAT at the rate of 4%, empowered committee secretary Ramesh Chandra indicated today.

"All drugs are life saving," Ramesh Chandra said in at a function organised by the ICAI.

On whether exemptions would be granted to life saving drugs, he merely said,"unlikely."

At its last meeting on April 26, the empowered committee of state finance ministers arrived at a consensus that medicines would attract 4% VAT rate.

However, a decision on life saving drugs was deferred. "We will form a view on life saving drugs subsequently," empowered committee chairman Asim Dasgupta had said.

Ramesh Chandra said a mechanism will have to be evolved to make states agree on a minimum floor rate. For this, assistance of the centre is required, he added.

The empowered committee had to revoke its own decision to have a minimum floor rate of 20% on diesel after Punjab and Haryana did not agree to it and Delhi complained that it was losing trade on the fuel to the two states.

The VAT panel permitted Delhi to rollback an increase in tax on diesel to an earlier level of 12.5%.

Ramesh Chandra said in the next 10 days, VAT panel would start visiting the states that have not implemented the new tax system to persuade them to replace the sales tax regime.