Confederation of Indian Pharmaceutical Industry (CIPI), the umbrella organization of all small scale drug units in the country, has suggested a 50 per cent cap on Cenvat Credit on medicines. Alternately, CIPI also called for 4 per cent excise duty on drugs without any Cenvat Credit benefits. The suggestions have come in response to the Finance Ministry's apprehension that reduction in excise duty will cause an inverted duty structure and credit accumulations.

In a letter to the Prime Minister, CIPI stated that Cenvat Credit generally amounts to less than 20 per cent of the excise payable, despite 16 per cent excise duty on raw material. The confederation complained that the Finance Ministry has not given due consideration to the problems of the SSI drug sector.

CIPI sighted three replies from concerned government departments to the queries posed by their members under Right to Information Act, to prove that SSIs were totally sidelined while decisions pertaining to MRP based excise duty or implementation of Schedule M were taken. "These two legislations are lethal enough to eradicate the entire 5,000 SSI drug units in India employing 10 lakh workers and producing half the country's medicines," CIPI stated.

CIPI also questioned the official stand taken by the Finance Ministry that evaluation dispute was the only reason that prompted the levy of MRP based excise duty. "Our question on loss of revenue and price rise caused by shifting of industry to exempt states as a result of MRP based excise has not been answered," they said.

According to CIPI, MRP based excise duty magnified the disparity between the units in the tax exempt and non-exempt states. "Our SSI exemption has been truncated to one third," CIPI stated.