Karnataka chemists have incurred losses to the tune of Rs 60 crore on the stock holding as on March 31, 2005. With the Commercial Tax department offering to refund only 4 per cent of the tax on all unsold stock as on April 1, 2005, after three months and complete refund process by the end of the financial year, the worst fears of the pharmacy retail sector has come true.
The problems are surmounting because all unsold stock suffered a sales tax of 12 per cent but under VAT, drugs comes under 4 per cent tax rate. Selling old stocks would result in net loss of 8 per cent for the trader and the government has refused to refund the tax paid in full.
The pharmacy trade in the state has conducted five rounds of meetings with Ashok Kumar C Manoli, commissioner, Commercial Tax department who stated that he would forward their demands to the empowered committee of state finance ministers for a decision.
V Hari Krishnan, president, Bangalore District Druggists and Chemists Association informed that there had been some problems in the availability of drugs as the retailers had not lifted stocks in the last couple of months fearing losses.
The confusion on VAT on maximum retail price of drugs too still remains. The uncertainty over VAT has not only led to shortage of drugs but now chemists say that they would have to sell tablets or capsules only in complete strips instead of the earlier one tablet or one ampoule.
The Commercial Tax commissioner stated that in the next 48 hours he would try his best to provide some solution, stated Hari Krishnan.
According to MP Medappa, senior vice president, BDDDC, a revised memorandum has been submitted to the State Government seeking relief. The trade representatives have requested the government to implement VAT on MRP at first point of sale so that the government gets full revenue.
On the non-availability of drugs in the market, Medappa stated that it was just a transitional period and if one particular brand is not available, then its substitute would be available.
Meanwhile, in the state, VAT has turned out to be a bitter pill for the consumers as the chemists are refusing to dispense one table and insist on a strip sale only. Many consumers are taken aback at the new unwritten rule among chemists.
When Pharmabiz spoke to a section of chemists in Bangalore, they came out with problems they are facing with VAT. It is tough for druggists to bill medicines as per the VAT norms. For certain cheap drugs, the printing of the bill has become more expensive than the tablet. In the process, the druggists are also extremely guilty of denying medicines in small quantities to patients.
With important vaccines like anti rabies and anti jaundice not being made available in all shops, there is panic among the public. The shortage is attributed to the wholesalers who have not supplied the stocks. "We welcome VAT but we want it as a single point preferably at the manufacturers level," they stated.
The chemists further averred that VAT being introduced in the country for the first time with over countless clauses, even before the pharmacy trade is used to the system, the government should realise that a new tax reform should be introduced in stages with ample education programmes and awareness drives going along with it.