Drug firms get 3-month relief on uniform MRP

Conceding to the industry's demands, the chemicals and fertilisers ministry has given a three-month reprieve to pharma companies for printing drug labels with a uniform maximum retail price, inclusive of all local taxes.

The new price scheme was to come into force from July 1.

"The industry has some problems in shifting to the new regime, printing of labels and recalls etc, so we have extended the deadline by three months. It would be applicable from October 2 now," said a department of chemicals and petrochemicals official.

With the revised directive, both the maximum retail price (MRP) inclusive of all taxes and bilingual drug labels (in Hindi and in English) would come into force from October 2.

"Ideally, we would have required six months but we can manage to print the new price on fresh batches in three months too," said Indian Drug Manufacturers' Association (IDMA) Secretary-General Daara Patel.

The industry body "" representing small and medium-scale pharma companies "" had earlier written to the department that the industry was not ready for the switchover to the new regime.

However, quite a few thorny issues remain. "We are waiting to see what form this gets implemented in. Revenue neutrality is what we are looking for, but local taxes vary across the country on account of octroi, sales tax, non-implementation of VAT uniformly etc," said DG Shah, secretary-general, Indian Pharmaceutical Alliance.

The pharmaceutical industry had earlier voiced concerns that it would have to incur additional costs of up to Rs 1,000 crore. This would be on account of higher excise and sales tax payout and batch recalls from the market for reprinting of the batches.

With a three-month reprieve, the issue of recalls has been sorted out as existing stock can be disposed of in the intervening period up to October 2.

In order to neutralise the distortionary tax effects, both the associations are asking for an increase in the abatement level. 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.

"4 per cent tax is being accounted for, keeping in mind VAT rates but VAT is not applied nationwide. We want that to be increased to 6 per cent," said Patel of IDMA.