RSP based excise for medicaments – strong medicine – Bitter pill or sweet?
THE RSP-based assessment for the pharmaceutical industry was very much on the cards, but what took the industry by surprise was the weekend notification, which has become a normal practice with the Board of late. On 7th January 2005, Friday, after all the Central Excise offices were closed, the Government issued the notification bringing into force the RSP assessment for medicaments effective from 8th January, Saturday. Frantic assessees and departmental officers had nowhere to go to get the notification. As usual Taxindiaonline was the only source where the notification was available. Why should the government bring in this kind of amendments on a Friday evening and make them effective from Saturday. Remember the warehousing withdrawal for petroleum products? This change is going to have ramifications in the whole industry and a class of manufacturers called job workers are going to be out of business. The Government could have given them a little time to settle and maybe wind up their business. After all the Government procrastinated for nearly three years and three more months would not have made much of a difference. May be the Government wants to collect a little more revenue as its targets have gone topsy-turvy.
“The pharmaceutical industry seems to have accepted the fact that an excise on MRP would come sooner or later, and now left with the contention that how much should be the abatement on MRP”, said a report in Express Pharma plus on 10th October 2003.
It is a well known fact that outsourcing is predominant in the industry and most of the products are got manufactured on job work basis and the value for exciswe is a fraction of the ultimate price paid by the consumer. The C&AG had made a study on the assessment of medicaments. In its report No 11/2003, it analysed the value adopted for Central Excise duty and the retail price as in the table extracted from the report.
Assessee/Brand owner | Product | Avg. retail price per unit | Avg. value on | Assessable value as a |
|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) |
Proctor & Gamble | Vicks Cough Drops | 1.00 | 0.118 | 12 |
Sanjivani Parenteral | Gentamycin Inj. 10 ML | 34.78 | 6.14 | 18 |
German Remedies | Metheergin Tablet, T-480 | 2400.50 | 680.65 | 28 |
Maneesh Pharma. | Logical Tablets 500MG | 303.40 | 6.60 | 2 |
Mac Laboratories | IMEM 10 Tablets | 34.50 | 6.27 | 18 |
Hemkesh Chemicals | Nimesulide Tablets - 10s | 24.00 | 2.09 | 9 |
Emcure Pharma. | Voveran emulgel 30 gm | 36.12 | 5.25 | 15 |
Vival Laboratories | Selsun 60ML, 120ML & 10ML | 57.15 | 9.05 | 16 |
Rhone - Polemic | Cipro 500MG 10 X 10T | 613.00 | 122.84 | 20 |
From the above data, the CAG concluded that, “It is evident from the above that the value on which excise duty is being paid ranges from 2 per cent to 28 per cent of the retail price charged from the customers. In other words, the abatement availed is 98 to 72 per cent.”
So the Government was ready and waiting to go for MRP for these products. While the CAG would have liked a 30% abatement, the Government has been a little more generous in allowing 35% abatement from the retail price. The industry wanted 60%. While it is lamented that the value shown for excise by most of the companies is only a small fraction of the retail price, the fact that huge amounts of money are spent in advertisement, sales promotion and a hefty margin to the wholesalers and dealers, is conveniently forgotten. While this move will strengthen the coffers of the state, especially from the big players of the industry who will now pay more, but the small players who operate on small profits are going to be doomed as they will not be able to meet all their expenditure out of the 35% abatement. A dose of strong medicine indeed!.
See Notification No dated 7.1.2005 effective from 8.1.2005.