The pharmaceutical manufacturers in the country have unanimously decided to support the All India Organisation of Druggists and Chemists (AIOCD) in its move against the multiple level imposition of VAT on drug products.

The drug traders' organization, which has raised objection to the Central Government decision to collect VAT at the manufacturers' point as well as at the trade points, is also opposing the Union Budget recommendation to classify the trade on the basis of turnover for the collection of VAT as it would create price discrepancy and confusion among the consumers.

The industry, which is represented through three major associations such as IDMA, IPA and OPPI, would send their representation in this regard to Dr Asim Das Gupta, chairman, Empowered Committee of Finance Ministers and also to the union finance minister urging that the collection of VAT to be limited only to the first point so that the manufacturer could pay it and include the same in the MRP. Only by restricting the VAT to the manufacturer point, the purpose of uniform pricing can be served, the industry bodies said.

As per the Budget recommendation, the government is proposing to exempt the drug retailers with the turnover below Rs 5 lakh. But to collect one per cent composite tax from the retailers with turnover in the range of Rs 5 lakh to 40 lakh and 4 per cent VAT from the retailers with turnover above 40 lakh.

"The VAT collection from the retailer on the basis of their turnover as recommended in the Budget would cause discrepancy in retail prices of same drug brands even in the same market location," said a senior official in IDMA.

At the same time, as the manufacturer pays the VAT at the first transaction, which can be included in the MRP, there is no more confusion in the process, he added. The industry Associations would suggest these views to the Empowered Committee of Finance Ministers, the IDMA official said.

In the meanwhile, AIOCD has decided to suspend purchases of drugs from April 1 in the states where the VAT on MRP at first point is not implemented. However, the industry sources said that there were talks in progress between the companies and the trade association to avoid the boycott planned from April 1. As the individual companies may be willing to compensate the loss of traders in case the value difference due to VAT affects the distributors' profit by any chance, the declared suspension of drug purchases likely to be called off, it is learnt.