In its meeting held in New Delhi on Thursday, the empowered committee of state finance ministers has decided to implement a 4 per cent first point taxation on MRP instead of multipoint VAT for medicines as decided earlier, according to senior members of AIOCD. The meeting was attended by union finance minister P Chidambaram.

The new taxation system will be implemented in all 21 states that are expected to become VAT compliant from April 1, 2005.

Pharmaceutical traders seems to be satisfied with the conclusion at today's meeting, which exactly has been their demand.

"From what I have heard, the empowered committee has decided to implement the first point 4 per cent tax on MRP as against multipoint VAT. If the decision is implemented, we will pull call off our token strike planned on April 1 and the subsequent suspension of purchase of pharma products from drug companies and stockists. We will come to a conclusion on this once the latest decision of the government is available in print," said JS Shinde, secretary, AIOCD.

The association had decided to strike on April 1, followed by suspension of purchase of pharma products, if its demands were not met.

If implemented, this will be the second demand of the traders in recent months that will be realised by the government, after the removal of stringent requirements of the Narcotic Drugs & Psychotropic Substances Act (NDPS) in February.

AIOCD has also found solution to the losses borne by its members due to differences in sales tax paid by them before the implementation of the new tax and after. For instance, a trader in Maharashtra who purchased medicines at a sales tax rate of 9 per cent will have to sell them at 4 per cent, after April.

"Government and the pharmaceutical companies have agreed to compensate the difference amount to the traders, if there would not be any crisis," said JS Shinde.