January 2007 - STR — Important Trade Circulars

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Sales Tax Review

January 2007

Important Trade Circulars

No.VAT/ROT/1006/116/Adm-3

Trade Circular No. 1 T of 2006	Mumbai, dated 03.01.2007

Sub:

Taxation of Medicine under the Maharashtra Value Added Tax Act, 2002 (Mah. IX of 2005) -
Special Provisions regarding taxation of Medicines.

Ref:

1) No. VAT-2005/Act/VD-1, Mumbai, dt.1.4.2005 Trade circular No. 1T of 2005.

2) No. VAT-2005/Act/VD-1 Mumbai, dt.19.5.2005 Trade circular No. 7T of 2005.

3) No. VAT-2005/Act/VD-1 Mumbai, dt.20.9.2005 Trade circular No. 28T of 2005.

4) No. VAT-2005/ROT/116 Mumbai, dt.13.11.2006 Trade circular No. 35T of 2006.

5) Order No. 946(E) dated 26^th June 2006 by Department of Chemicals and Petrochemicals, Ministry of Chemicals and fertilizers, Government of India.

Gentlemen / Sir / Madam,

As per the provisions contained in Explanation IV to clause (25) of section 2 of Maharashtra Value Added Tax Act, 2002, the sale price for the drugs specified in entry 29 in Schedule-C is ‘maximum retail price printed on the package containing drugs’. The dealers in drugs and medicines are accordingly required to levy and collect tax on MRP printed on the package containing the drugs. It has also been clarified by the circular at reference No.1 that only the manufacturers and importers need pay tax on their sales.

The Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India has issued order No. 946(E) dated 26^th June, 2006 making it mandatory for all the drug manufacturers to print maximum retail prices of medicine inclusive of all taxes w.e.f. 2^nd October, 2006, for drugs manufactured on or after 2^nd October, 2006.
Now as per this order, the MRP printed on the package containing drugs and medicines has to be inclusive of all taxes including sales tax or VAT. This necessitates amendment in the Maharashtra Value Added Tax Act, 2002. Till such suitable amendment is effected, the manufacturers and importers of Drugs should pay taxes on MRP after claiming deduction in accordance with the provision contained in sub-rule (1) of rule 57 of the Maharashtra Value Added Tax Rules, 2005. The Trade circulars referred to above will continue to be applicable till the Act is amended.
This circular is clarificatory in nature. If any member of the trade has any doubt, he may refer the matter to this office for further clarification.
You are requested to bring the contents of this circular to the notice of all the members of your association.

Yours faithfully,

(B.C.KHATUA)
Commissioner of Sales Tax,
Maharashtra State, Mumbai.