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No excise duty on relabelling of drugs to comply with pricing order
August, 03rd 2013

The finance ministry has exempted drugmakers from the excise duty on repacking or relabelling to ensure smooth transition to new drug price regime. This exemption would be available for 45 days after the prices of the essential drugs are notified by National Pharma Pricing Authority. The government has asked the pharma companies to ensure that the essential drugs they market have the prices mandated by the new drug price control order within 45 days of the price notification comes into effect.

The finance ministry decision means drugmakers will not have to pay excise duty once more on the essential drug packs which have already been sent out of their factories and they choose to carry out the re-printing, relabeling at sites other than the facilities, registered under Central Excise Act. However, to avail of this exemption, domestic drugmakers would have to furnish to the government a list of essential drugs covered under drug price control order, 2013, which needs re-printing, relabeling, re-packing or stickering.

They would also have to inform the government of the sites and locations, where they plan to carry out this exercise of re-printing, relabeling, repacking and stickering along with the details of the current Earlier this year, when the new drug pricing order was announced, there were fears that the mandate of compliance within 45 days would lead drugmakers to cut back on production of essential drugs to avoid carrying unsold stock on which the excise duty and the VAT would have been paid on the higher prices.

The drugmakers dreaded that they wouldn't be able to claim refund of these duties without bringing them back in to factory from which they were cleared. If they bring these drugs back, besides twoway freight, repacking and handling expenses, they would also lose the shelf life of the product. This provision under DPCO, 2013 to relabel within 45 days has already been challenged by Cipla and Sun Pharma in the Delhi High Court.

Some of them have argued that conforming to DPCO in this regard may violate excise law. However, the drug firms count many other problems in implementing this provision. "Besides tablets and capsules, many essential drugs are also sold as drops, vials, bottles and intravenous forms. In these cases, labeling is carried out at the manufacturing facility itself and doing it elsewhere may cause damage to the drug," said a pharma firm executive.

Many of the retailers affix their own bar codes for effectively managing their inventory, which makes it difficult for the company to redo the labeling without damaging the packing, rendering them unsaleable, another drug firm official said.

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