Drug MRP to include all taxes from Oct 2

The government has issued an amended Drug Prices Control Order, 1995, which makes it mandatory for all pharmaceutical companies to sell drugs at maximum retail price, inclusive of all taxes from October 2 this year. The maximum retail price will include local taxes, excise duty, sales tax or value-added tax.

Till now, drugs were the only packaged commodity to have local taxes added to the retail price, often leading to confusion between consumers and chemists. After October 2, when the order comes into force, drugs will be sold at a uniform price as per the label across the country.

According to the amended rule "" Drugs (Price Control) Amendment Order, 2006 "" pharmaceutical companies will have to print "maximum retail price inclusive of all taxes" on packaged medicines.

Industry bodies, like the Indian Pharmaceutical Association and Indian Drug Manufacturers' Association, have been protesting against the move as the tax regime is not uniform in the country.

Tamil Nadu and Uttar Pradesh have still not switched over to the value-added tax (VAT). These states still charge sales tax. This, along with recalls, would make the industry incur losses to the tune of Rs 500 crore a year, the associations had pointed out earlier.

However, as a respite to the industry, there will be no recall of drugs manufactured before October 2, according to the order.

Post-October 2, drug companies will have to do away with the practice of printing "local taxes extra" along with the retail price. It will be substituted by the new labelling system.

The maximum retail price will be calculated as the sum of ex-factory expenses, which include material cost, conversion cost, packaging material cost, packing charges, 100 per cent maximum allowable post-manufacturing expenses on ex-factory cost, excise duty, sales taxes/value-added tax and other local taxes.