The All India Organisation of Chemists and Druggists (AIOCD) has urged the Union Government to exempt all medicines from VAT and implement a single point taxation, based on MRP, along the lines of sales Tax Act of West Bengal and Rajasthan.

A single point taxation system, according to AIOCD, will bring about uniformity in payment of taxes across all section of retailers, said senior AIOCD officials.

As per the proposed new tax regime for medicines, a VAT of 4 per cent will be charged from traders having a turnover of Rs 5 lakh or more per annum. For those traders with a turnover less than Rs 5 lakh, only 1 per cent (TOT) tax will be charged.

According to AIOCD, a large number of retail shops in the country have a turnover of less than Rs 5 lakh per annum. Since these traders pay only 1 per cent tax, only one per cent tax will be charged from the customer shopping for medicines from these outlets. On the contrary, retailers (with turnover of Rs 5 lakh or more) paying VAT of 4 per cent, a bill with a 4 per cent tax will be charged from the customer.

"So a customer will have to bear an additional charge of 3 per cent, just because of buying medicines from a bigger shop. Therefore he will always prefer buying from a small shop, which enables him to save money compared to bigger retailer. For that reason, VAT is somewhat discriminatory. Instead, the government could charge 4 per cent on MRP, which will ensure uniformity of taxation," said J S Shinde, general secretary, AIOCD.

AIOCD, in a recent letter addressed to Asim Dasgupta, chairman of empowered committee, has highlighted this point.

"The government should not treat pharma trade on par with FMCG. Since medicines are essential for life's survival, it has to be included in the essential commodity list," said AIOCD officials.

According to the organisation, since pharma trade is highly regulated by Central Acts, there is virtually no scope for any kind of tax evasion by traders. Since the medicines contain MRP + Local Taxes Extra as stipulated in DPCO, it will be difficult to quantify the VAT suffered at earlier stages and result in different prices and losses to VAT dealer.

It also urged the chairman to exempt from levies such as Octroi, cess, entry tax and other transport barriers, as due to their incidence, the consignment of medicines are subjected to verification at the check post and are delayed beyond reasonable time.