The National Pharmaceutical Pricing Authority (NPPA) will effect a major modification in the retail tax provision in Drug Price Control Order (DPCO) to accommodate the changed tax regime in the country. The proposed change in the DPCO is to incorporate the shift of local sales taxes on the drug products into the value added tax (VAT).

This will take care of the changed tax structure on the controlled drugs in retail trade in the VAT complied states. According to informed sources, with the changes anticipated in the DPCO in connection with the local taxes charged in addition to the printed price of drug formulations, the Authority will create another clause by which the retailer would be permitted to charge value added tax in place of local taxes at the rate that is fixed by the central government from time to time.

As per the current VAT structure, the retail chemists would be permitted to charge 4 per cent VAT on the MRP of drug products. However, since the VAT is implemented only in seven states in the country, the NPPA will be forced to enforce the new provision of DPCO only in those states.

Hence, the existing provision for empowering the retailer to charge local taxes or other charges whatever is incurred by the trade in addition to the printed price, would remain effective in the Order. Using this provision, the retailers can also charge the customer the charges like CST paid by the manufacturer/ distributor for the drug products sourced from a different state where the VAT is not implemented, if the retailer was charged the same by the distributor.