The pharmaceutical trade in Kerala is likely to come to a standstill from April 1, 2004 as the All-Kerala Chemists and Druggists Association (AKCDA) has decided to go on strike in protest against the State Government decision to introduce two-point taxation for medicines from the next fiscal year.
Pharmabiz had reported earlier that 200 odd wholesale drug traders in the state had stopped procurement of medicines since February 17, following the state government decision not to revoke the move despite repeated representations from the traders. Office bearers of the association warned that the available stocks in chemist shops were unlikely to last beyond another two to three weeks, and the state was likely to experience severe shortage of medicines soon. Since the Government was unwilling to backtrack from the decision, the traders had no option other than to announce strike, said the association.
In the recent budget, the state Government had announced to split eight per cent sales tax for medicines, as six per cent from the first point of sale and the remaining two per cent from retailers. The traders opine the move would cause to increase the prices of medicines by two to three per cent, as the operational expenses of the 9000 odd chemists in the state for maintaining files and other related works will increase considerably. The chemists, having daily average sales ranging from Rs.500, will have to earmark a substantial amount for the payment of two per cent of taxes, and the same will be much more than the nominal increase in collections.
According to AN Mohan, president and M Seydu, general secretary of AKCDA the move will automatically force a large number of retail chemists to close down. As per the earlier taxation system, the state was getting about Rs.56 crore at 8 per cent tax from around 250 first sellers and that too immediately after the sales. By the new move aimed to bring the exchequer an additional revenue of Rs.1.5 crore, six per cent of the tax will be collected at the first point of sale and the remaining two per cent from the retailer. The decision will not be rewarding for the government, as the collection of tax from first sale was likely to be around Rs.42 crore only. The remaining two per cent tax will be remitted to the exchequer only after the end seller sells the medicines, which at times is after a year or so of the first sale.
He noted that the decision would not be rewarding for the government, as the collection of tax from first sale was likely to be around Rs.42 crore only. The remaining two per cent tax will be remitted to the exchequer only after the end seller sells the medicines, which at times is after a year or so of the first sale.
The Government sources opine the move will not cause any price hike of medicines and the decision to split the tax system was to bring in more transparency into the tax collection system and to stop tax evasion. According to Commissioner of Commercial Taxes, Kerala, V.Somasundaram, the introduction of double point taxation was considered after studying a report of the Centre for Taxation Studies which stated that medicine distributors were cornering at least 60 to 70 per cent margin on medicines.