Following the increase in the VAT (Value Added Tax) by one per cent on medicines with effect from April 1, 2010, the Karnataka government has now issued a notification to the pharmaceutical trade that the old stocks of drugs available at retail chemists and wholesale outlets as on March 31, 2010 could be sold on the old VAT rate at 4 per cent.

In the Karnataka state budget on February 27, 2010, the government had announced the increase of VAT from 4 per cent to 5 per cent for pharmaceutical preparations and medicine.

The pharmacy trade was finding it difficult to exhaust the old stocks of drugs within one month between February 28 and March 31, 2010. Now the government notification to sell the old stocks at earlier VAT of 4 per cent would also avoid the wholesale and retail outlets getting into complications under the DPCO -1995 ( Drugs & Cosmetics Act 1940), Ravindhera MJ, secretary, Karnataka Chemists & Distributors Association told Pharmabiz.

KCDA had presented a memorandum to the Commercial Tax Commissioner and thereafter to the State drugs controller Dr BR Jagashetty asking for more time to sell off the old stocks under the old VAT levy. The latter convinced the government to give an extension of three months up to June 30, 2010 to sell the old stocks at 4 per cent VAT.

The notification issued by the Karnataka Commercial Sales Tax department via order No. FD 94/CSL/10 stated, “In exercise of the powers conferred by the sub-section (3) of Section 4 of the Karnataka Value Added Tax 2003, Karnataka Act 32 of 2004, the government reduces with effect from April 1, 2010 till June 30, 2010 the tax payable under this Act to 4 per cent on sale of medicinal plants and pharmaceutical preparations.”

Further, the notification also stated that a dealer could sell his drugs out of the stock held as on March 31, 2010 and on which tax has been paid at 4 per cent under the VAT Act on its sale to him by another dealer registered in the state.

The state has around 23, 000 chemist retail and wholesale outlets. The notification has brought much relief to the pharmacy trade, said the secretary, Karnataka Chemists & Distributors Association.