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CAG: Pharma firms did not pass excise cut relief to consumers
December, 28th 2010

Certain pharmaceutical companies did not cut down price of drugs despite a relaxation in excise duty, making a profit of Rs43 crore. These firms also evaded service tax to the tune of Rs182.81 crore, a Comptroller and Auditor General (CAG) report has revealed.

In view of these violations, CAG has recommended amendment in the Drugs (Prices Control) Order,1995, Act to include penal provisions.

It has also recommended that excise and service tax returns be integrated to mitigate the risk of evasion of duties/tax.
The government has agreed to address the issue while introducing the Goods and Services Tax (GST).

For now, drug manufacturers should be compulsorily asked to declare on their excise returns, whether they had provided output services or received any service from foreign service providers, CAG said.

The public accounts watchdog said during the scrutiny of records it was found that certain manufacturers in Pune, Indore and Mumbai were producing and clearing bulk drugs specified in the first schedule of the Drugs Price Control Order but exceeded the Maximum Allowable Post-manufacturing Expenses (MAPE) by 100%.

It was also found that the National Pharmaceutical Pricing Authority (NPPA) had not specified the maximum retail price (MRP) at which the bulk drugs would be sold, which left the consumers paying up more, adding Rs23.53 to the manufacturers kitty.

The NPPA had agreed in February to recover the amount from M/s. Nicholas Piramal India Ltd. Action taken on the other two firms had not been intimated till March end.

There were two other cases where the NPPA had fixed the ceiling price of certain bulk drugs but the manufacturers charged higher prices from the consumers.

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