In a move that could put breaks on the trend to print disproportionately high MRP on the medicines, the Union Finance Ministry has decided to calculate excise duty on the basis of the retail prices of drugs and medicines.

The finance ministry, that has been holding detailed consultations with the industry organisations like Indian Drugs Manufacturers Association (IDMA) and Organisation of Pharmaceutical Producers of India (OPPI) during the last few days, has come out with a notification on January 7, 2005 to enforce its decision with immediate effect.

The notification (No. 2/2005-Central Excise NT) brings drugs and medicines under the purview of levying excise duty on the basis of retail price declared under Drugs (Price Control) Order, 1995. The government has stated that the retail price based assessment of excise duty avoids disputes on valuation and ensures certainty in assessment. According to a Finance Ministry statement, the change in assessment method has simplified the excise procedures.

Excise duty on drugs and medicines will be levied on the value determined after deducting an abatement of 35 per cent from the declared retail price. "Drugs and medicines are often manufactured on job work basis and also by loan licensees. This leads to differences in practice of assessment and disputes. In order to ensure certainty in assessment, the provision of levying excise duty on the basis of retail price based assessment has been extended to medicaments, other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic," stated an official release.