Pharma Fantasy - More Credit than Required. Inputs at 10% Final Products @ 4% - Anomaly or omission?
WE received this mail from a harried assessee.
We are manufacturers of both Bulk Drugs (APIs) & Formulations and presently attracting the Excise Duty 10% and 4% respectively. With respect to our formulations, we are facing CENVAT Credit accumulation problem due to inverted duty structure. We are getting the CENVAT Credit on all the inputs @ 10% whereas we are paying 4% on the Final Products.
The Finance Minister as part of Stimulus Package reduced the Excise Duty Rates from 14 to 12% and then 12 to 8 % and in certain cases, 8 to 4% . P or P Medicaments (Formulations) are covered under this bracket. Reference Sl. No. 62 A to 62 E of Notification No. Dated 1.3.2006 (included vide Notification No. Dated 01.03.2008)
During this year Union Budget, Government increased Duty rates again to 10% in majority of the products by amending various Notifications vide Notification No. 6/2010-CE Dated 2010.
Unfortunately, while increasing duty rates for majority of the excisable goods, the Board had not increased the duty rate of Formulations and kept the same @ 4% duty rate without considering to include in the Notification No. Dated 07.12.2008 vide which the duty on formulations was reduced from 8% to 4%. Because of this, the Pharma Industry is facing CENVAT accumulation problem which is adversely affecting the Working Capital Management.
Sir, I am of the sincere opinion that the Board might have by oversight forgotten to include this Notification while increasing the duty rates in the Notification No. Dated 27.02.2010.
I have raised this issue in different forums but so far nothing has happened.
Will the Board clarify and rectify this anomaly at least prospectively?