The Hindu Business Line : Maditssia for lower excise duty on drugs

THE Madurai District Tiny And Small Scale Industries Association (Maditssia) has appealed to the Union Minister of Commerce and Industry, Mr E.V.K.S. Elangovan, to consider reduction of excise duty on pharmaceuticals from 16 per cent to 8 per cent to relieve the burden of small-scale manufacturers doing job work for large-scale industries.

In a memorandum submitted to the Minister during his recent visit to the city, the association has pointed out that the excise duty for drugs and medicines has been changed on January 8 as MRP based, from sale price of medicines.

This would mean that an excise duty of 16 per cent will be charged on 60 per cent. If Rs 100 is marked on the label then, on 60 rupees 16 per cent is to be paid. This means that Rs 10 is to be paid by manufacturers as excise duty for an item of Rs 100 MRP. This will be big burden on small-scale manufacturers.

Many of them have been doing job work for large-scale industries. This opportunity is now dwindling because large-scale manufacturers are now starting factories in Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Jammu and Kashmir etc, where excise duty holiday is prevailing. Moreover they enjoy a number of other benefits such as sales tax holiday, electricity subsidy, women employment subsidy etc.

If the excise duty is revised as suggested, it would discourage migration of units to excise free zones in Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Jammu and Kashmir etc and discourage large companies from setting up own manufacturing units specially in excise free zones. This will lead to continuation of outsourcing from small-scale industry, providing them the lifeline.

Since more than 50 per cent of the production in pharma industry comes from outsourcing, where the 16 per cent excise duty was paid on considerably lower transfer prices, 8 per cent MRP based excise will more than make-up for the difference. The association has also requested revision of the existing exemption limit of Rs 1 crore to SSI sector to at least Rs 3 crore. Because with the implementation of MRP based excise, the assessable value of goods cleared has increased resulting into quicker utilisation of the exemption.

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