VAT may lead to confusion

Megha Lodha - Mumbai

With the Value Added Tax (VAT) regime coming in soon, various organisations like the All India Organisation of Chemists and Druggists (AIOCD) and the Retail and Dispensing Chemists Association (RDCA) have suggested a better way to charge the tax that will avoid confusion for the government as well as the consumers.

Speaking to Express Pharma Pulse, Jagannath Shinde, secretary, AIOCD said, “Medicine is the only commodity which is controlled by the government (by the Drug Price Control Order).” In the white paper on VAT presented by the Empowered Committee, it has been stated that for retailers having a turnover upto Rs five lakhs per annum would not fall under the cloud of VAT added Shinde.

Those earning in the bracket of Rs 5 - 50 lakhs dealer can opt for the composite scheme, ie. they pay one per cent tax on their turnover. It would only those retailers earning above Rs 50 lakhs who will have to pay VAT, explained Shinde.

As per Shinde, 30 - 40 per cent chemists in the country will be exempted from VAT, as they would fall in the first category. Of the remaining 60 per cent, 95 per cent will fall under the second category leaving barely five per cent of chemists who would then be liable to pay the sum under the VAT system.

Explaining the suggestion made by the organisations to the government, Prasad Danave, of the RDCA said, “It is a multiple point tax right now because there is no clear picture yet given by authorities itself. Only a white paper has come. It is not in the form of a rule.” The VAT is at multiple points, going by the white paper. Instead, said Danave, “If the manufacturer collects the sales tax/VAT at the MRP before the drugs go to the wholesalers/retailers and then pays to the government, it not only avoids confusion but also saves on duplication of work while the government also gets its share of revenue.”

Adding on this, Shinde stated that if what the current paper states; goes on, then it would mean that there will be two prices for the same medicine. This would turn out to be a deterrent to law, he said as it would go against the provisions of the DPCO and in fact, overlap it.

He further stated that this ambiguity has been explained and the associations are in dialogue with the government to work out a possible solution.

— meghalodha@expressindia.com