The pharmaceutical industry in the country has urged the union finance ministry to mitigate several central excise-related problems being faced by the industry including the accumulation of CENVAT which results in blockage of working capital of a large number of companies.
The pharma industry has been facing the problem of huge CENVAT accumulation specially due to anomaly in rate of excise duty on input versus output and high rate of service tax on input services. This has resulted in blockage of working capital and affected competitiveness of the companies in the international market, according to DB Mody, Pharmexcil's panel chief for foreign trade policy & indirect taxation.
The industry wanted the finance ministry to introduce parity in the input/(12 per cent)/ output(six per cent) rate of excise duty for pharmaceutical products and the pharma exports should be allowed to be cleared at marginal rate of duty (12 per cent as on inputs).This would benefit exporters at no loss/burden to exchequer and domestic market.
Besides, the government should allow utilization of CENVAT credit for payment of service tax on reverse charge basis and also allow easy and prompt refund of accumulated credit under Rule 5 of CENVAT credit rules. The industry also wanted the payment of interest if the refund claim is not sanctioned within 30 days of the application.
Arguing to increase the abatement, the industry said that consequent to the proposal to increase excise duty for finished formulations to 12 per cent from six per cent, the abatement would need to be increased suo moto to 45 per cent, as the current 35 per cent abatement would not be sufficient to cover the trade margins, input costs etc and the value of R&D costs and other costs incurred by the pharma industry.
The industry also wanted exemption of central excise duty for physician’s samples in line with exemption from levy of value added tax (VAT).