The Kerala Government has assured the drug industry and the traders that it will withdraw the already implemented multi-point taxation on drugs. However, the decision could be implemented only after convening the next session of the state assembly, it is learnt.

Though the new tax rule has come into effect from April 2, the Sales Tax authority in the state is learnt to have instructed its officials to maintain the earlier practice of accepting first point sales tax, under the current circumstances.

A hurried department level communication in this regard is likely to be circulated soon, government sources informed Pharmabiz.

Since the proposal was a budgetary announcement and the house approved the budget, changes require concurrence of the state legislature. With the elections round the corner, the state assembly was unlikely to meet before the Parliament election process. Sources opined the decision could be effected only after at least two three months when the assembly meets next time.

Talking to Pharmabiz, A. Mohan, president of the All-Kerala Chemists and Druggists Association (AKCDA) noted that as Pharmabiz reported earlier, AKCDA had obtained assurance from the Government to withdraw the proposal. Hence, the multi point taxation imposed by the government had been completely boycotted by the industry and trade.

He also said the Government has not backtracked from its earlier assurance of withdrawing the proposal. Further, the implementation of multi point taxation since 2nd April would not cause any hike in medicine prices. "We are still remitting the ST at first point of sale. So, it is wrong to assume that medicine prices will rise," said Mohan.

In the recent budget, the State Government had decided to levy six per cent ST and 15 per cent of it as additional sales tax during the transaction between the manufacturer and the wholesaler (first sale) instead of the existing norms of 8 per cent plus 15 per cent additional sales tax imposed during first sale. The remaining 2 per cent and its additional ST was to be levied after the trader sells the product.

Earlier, the drug traders in the state had decided to start an indefinite strike against the move citing it would cause to increase the prices of medicines by two to three per cent, as the operational expenses of the 9000 odd chemists in the state for maintaining files and other related works increase considerably. The chemists, having daily average sales ranging from Rs.500, would have to earmark a substantial amount for the payment of two per cent of taxes, and the same might be much more than the nominal increase in collection, the traders had maintained.

However, the drug traders called off the strike on March 9 following an assurance from the Government to withdraw the proposal.