The representative associations of the drug industry have rejected the proposal made by the Central Board of Excise and Customs (CEBC) to levy excise duty on drugs based on its maximum retail price (MRP). The associations have expressed their opinion at a meeting called by the Department of Chemicals and Petrochemicals here last week.

Associations like the Indian Drugs Manufacturers Association (IDMA) and Organisation of Pharma Producers of India (OPPI) are in favour of status quo with regard to the levy of excise duties, it is learnt.

Industry sources said that there was no need for a sudden change, when introduction of Value Added Tax system is round the corner.

Any decision to levy duty on MRP will harm the interests of the industry as MRP is often much higher than the ex-factory price of the drug. The high commission rates that go to the hands of the trade has always been a matter of contention, with states like Haryana, trying hard to cut down the profit margins on generic drugs and bring down the printed MRP on the drugs. Interestingly, Haryana had also proposed a similar change, to levy local taxes based on MRP. However, the plan didn't materialise.

The present move is expected to bolster the revenue of the central government. It is also expected that once the taxation is based on MRP, the companies will desist from printing unreasonable prices on medicines.

While there is a ceiling on margins for all price-controlled drugs, majority are outside the span of any such price regulation. The attempts of the National Pharmaceutical Pricing Authority (NPPA) to secure assurances from the drug makers to self regulate the pricing systems and thereby keep a check on the practice of offering unreasonable trade margins, also did not bring in the desired results.