Pharma firms agree on VAT

The Organisation of Pharmaceutical Producers of India and the Indian Drug Manufacturers Association have reached a consensus that the recent amendments in the value added tax norms for drugs in Maharashtra state to collect the tax at the manufacturer's level as a single point tax based on MRP.

Ranjit Shahani, president, OPPI said that that after a long debate two associations have come to an agreement that VAT as it should be implemented as a 'single point tax' based on the maximum retial price only at the manufacturer's level. The idea was that it would ensure full realisation of VAT in one step.

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Once the Drug Price Control Order (DPCO) has amended the change, the nomenclature of price to "MRP inclusive of all taxes", the application of VAT should be extended over the entire distribution chain up to the retailers as for other products, he said.

Following the amendments in VAT rules notified on 20 May, the OPPI had made representation to the state government to revise the decision to implement the single point VAT based on MRP, as it is contradicts the basic principle of VAT, which is supposed to be collected at every point of sales.

However, IDMA, an association mainly represented by domestic pharma companies, supported the amendments as it was one of the recommendations made by the association towards implementation of VAT in the state.

While the OPPI, the industry association of multinational drug companies, protested against the move as it would disallow the customers to enjoy the benefits of trade discounts.