The finance ministry has notified a 5 per cent increase in abatement while calculating the excise duty on MRP for drugs and medicines. With this, the excise duty on drugs will be charged on 60 per cent of the MRP and not 65 per cent as decided earlier.

The finance ministry statement says that the enhancement of the level of abatement was carried out in view of the special nature of the industry and the presence of large number of small and medium manufacturers.
The ministry has also taken into account the representations received from the manufacturers and all material facts, the statement said. Interestingly, the SSI sector was not pressing upon a 5 per cent increase in abatement, but was seeking a roll back on the MRP based assessment system itself. The larger companies have welcomed the move, with a hope that a lesser excise duty at 8 per cent would accompany the increased abatement soon.

As pharmabiz had reported earlier, C & F ministry has sought a reduction in excise duty on all essential medicines that figure in the National Emergency Drug list of the union health ministry from the current 16 per cent to 8 per cent. The industry wants this reduction to happen across the board. Such a reduction coupled with the increase in abatement can contain the drug prices to its present level, the industry feel.

The industry argues that pharmaceutical industry cannot be treated at par with other industries, as drugs are a class apart. "Drugs carry an expiry date. The breakage and expiry both call for product recalls. There is also a need to maintain cold chain facilities in the case of several drugs. All this warrants more expenditure and hence more abatement needs to be allowed for drugs," the industry sources say.

The industry feels that the excise laws should be amended to provide a differential treatment to medicines if the current law doesn't allow abatement on expenses other than discounts and margins.