The Union finance Ministry has turned down the plea from the pharmaceutical associations to raise the eligibility limit under small scale tax exemption scheme for pharma units by enhancing the exemption limit.

The ministry is learnt to have refused to review the existing scheme and extend benefits to the struggling small scale units, on the ground that the cut in the excise duty announced in the budget on all pharmaceutical products was good enough to help the SSIs.

The associations in the past had moved the finance and chemicals ministries several times with the requests of further liberalising the tax exemption scheme for the pharma units which were struggling to survive. The chemicals ministry also backed a similar demand by the pharma sector and wrote to the finance ministry.

However, the finance ministry which also received requests to reduce the normal rate of excise duty from 16 per cent to 4 per cent on all pharmaceutical products including drugs went for a cut in excise duty to 8 per cent and decided not to make any changes in the tax-exemption scheme.

Pharma units are also eligible for general SSI excise duty exemption scheme at present. Units having clearance value upto Rs four crore in the preceding financial year are eligible for full excise duty exemption on their first clearance upto Rs 1.5 crore in a financial year, subject to certain conditions, ministry sources explained.

In states like Uttarakhand and Himachal Pradesh, new units or units undertaking substantial expansion are fully exempt from excise duty, which such units in the North East, Jammu and Kashmir and Kutch are entitled for refund of duty paid in cash.

However, the small scale units, especially those outside the tax-free zones, have been pressing the Centre to increase this threshold limit for the pharma units to bring some level-playing field with their counterparts.

According to reports, more than half of the SSI pharma units have either closed down or suspended business activities in the last two years due to several factors including the mandatory implementation of GMP. A recent study by DSIR also showed their bad plight in mobilising finances and lack of expertise, technology and guidance to compete with the big units.