Kerala will soon promulgate an ordinance to allow sale of certain medical products and nutraceuticals through medical shops at 4 per cent category of Value Added Tax (VAT), instead of the present 12 per cent tax as per the new VAT regime.

However, the benefit is likely to be restricted only for medical shops selling such products at less than 5 per cent of its annual turnover. Trade sources say the decision would bring about 200 products, including surgical items, surgical devices, IV sets etc. sold through the medical shops under the 4 percent VAT regime, and would considerably ease the tax burden on retail traders. Many of these items, like Protemix dietary supplement, are normally not available in provision stores or super markets, and most are sold as per the prescription of doctors.

The All Kerala Chemists and Druggists Association (AKCDA) recently brought this issue to the notice of the Taxes Commissioner citing Central Excise Tariff Code numbers 3001 to 3006 on drugs having provision to extend the same 4 per cent category of taxes applicable to food supplements or nutraceuticals as it could be classified under the ‘other such products’ category. The excise authorities heeded to the plea of the traders and recommended the government to promulgate an ordinance in this regard, said sources.

Meanwhile, AKCDA is also thinking of restricting the sale of many healthcare related products like toothbrush/health drinks, toffees etc. through medical shops, as these products now attract 12 per cent tax. A senior AKCDA source said the association would suggest its members to ‘self restrict’ sale of such items, and would leave the option for the individual outlets to decide what to sell or not.

Sources said, Kerala, like the state of Delhi, already allows tax exemption to about 12 products like vaccines, insulin, contraceptives, blood and blood products. The empowered committee on VAT is also in the process of finalizing a list of products that could be brought under the 4 per cent tax net on a national level among the VAT implemented states.