The Organisation of Pharmaceutical Producers of India (OPPI) has demanded to the Union finance ministry to rationalise and reduce the excise duty on active pharma ingredients (APIs) from 12 per cent to six per cent in the forthcoming union budget. It also demanded for the exemption of central excise duty for physician samples as in line with exemption from levy of Value Added Tax (VAT).

In its pre-budget memorandum, the OPPI brought to the notice of the ministry that it levies 12 per cent central excise duty (plus three per cent Cess) on APIs, whereas the formulations is subject to central excise duty of six per cent (plus three per cent Cess). This inverted duty rate structure has resulted in huge accumulation of Cenvat Credit for manufacturers especially those who are not engaged in exports/have minimal exports and cater only to the domestic market, it said.

The memorandum further says that the higher rate of central excise duty on inputs namely API as compared to the duty on finished goods manufactured thereof (i.e. formulations) has led to accumulation of Cenvat Credit for the Indian pharma formulation manufacturers as the duty paid on inputs cannot be set off against the output central excise duty liability in spite of value addition on finished goods. Further, there is no provision to get refund of the accumulated Cenvat Credit, which eventually could be a cost to such pharma manufacturer.

Along with the reduction in excise duty from 12 per cent to six per cent, the OPPI also demanded that the government alternatively should introduce a refund mechanism to enable pharma manufacturers to avail refund of excess Cenvat Credit especially in case of such an inverted duty structure.

Besides, the OPPI also demanded to the finance ministry that physician samples should be exempted from central excise duty since these are not commercial packs and are given free to doctors. All packs given to doctors are marked as “Physician sample, not for sale”. Further, physician samples supplied without consideration are exempted from levy of VAT.

Exemption from levy of central excise duty should be considered for physician samples as in line with exemption from levy of VAT. Also similar provisions for exemption under Goods and Service Tax (GST) should be considered for supply of physician samples going forward, the OPPI memorandum said.