The SME Pharma Industries Confederation (SPIC), a body of thousands of small scale pharma units in the country, has demanded to include the pharma industry in the lowest slab as in case of precious metals in the coming Union Budget when the Goods and Services Tax (GST) will replace excise duty and some other taxes like CST and Service Tax from April 1, 2010.

It cannot be overlooked that medicines are not a luxury but a life saving product. Hence, they deserve to be covered under the lowest slab, the SPIC in its budget proposal to the Department of Pharmaceuticals (DoP) said. Earlier, the DoP had invited proposals from the industry associations for the 2010-11 budget.

Other demands of SPIC included raising of pharma SSI exemption limit to 5 crore as per recommendation of department of revenue (DOP) which is lying with DOR for two years. Pharma cannot be rated at par with other service providers who are neither regulated nor covered under price control. Pharma is the only sector which is both regulated as well as under Price Control.

The SPIC also demanded that various other taxes should be amalgamated into GST. It is not advisable to waste energies in being bogged down in filing too many returns on different taxes. All types of forms (C, H, etc) and road permits for transportation from one state to another should be scrapped with levy of GST. Rates of GST and State GST should be kept uniform for all states and the filing procedures should be simple and transparent to enable filing by SMEs themselves without support from CAs, which are additional cost for no reason.

These proposals will help for the survival of the pharma SMEs in India as the more than 5000 pharma SMEs have suffered during the last five years owing to anomalous fiscal policies which have been justified by DOR after levy of MRP excise in 2005. These anomalies were first pointed out by the Dr Pronab Sen Committee and then by the EAC of PMO Recommendations of EAC were even approved by the PM but never implemented by DOR, for reasons best known to it.

The anomalous fiscal policies coincided with implementation of Schedule M which mandated upgradation at an enormous cost at a time when SMEs were rendered redundant owing to MRP excise. Schedule M has escalated the cost of setting up a moderate sized SME unit to Rs 20 crore. Hence no new SME units have come up in the last three years except in Excise Free Zones, simply because they are enviable. An SME entrepreneur cannot repay loans given the small turnover of the business. The number of Pharma SMEs has reduced drastically. If SMEs are not protected, it will be handing over the entire local market worth Rs 50,000 crore to MNCs. India cannot forget that prior to advent of SMEs in 1960, prices of medicines in India were highest in the world, the SPIC said.

Pharma exports are worth Rs 40,000 crore today. This will be annexed by China, which produces lowest prices APIs, if SMEs are not protected. Needless to say, India itself handed over the initiative to China earlier in API production owing to parochial policies. It is high time the country realizes the grim situation and comes to the rescue of its 5000 pharma SMEs which are struggling to survive owing to numerous policy changes which are irrational, illogical and not in national interest, the SPIC said.