Date : 4th September, 2006

To

The Hon'ble Commissioner of Sales Tax,
Maharashtra State, Vikrikar Bhavan,
Mazgaon, Mumbai 400 010.

Dear Sir,

Sub : Taxation of Medicines after 2nd October, 2006

        As you are aware, Ministry of Chemicals & Fertilisers, Government of India, Department of Chemicals and Petrochemicals has issued order No. 946(E) dated the 26th June, 2006 making it mandatory for all the drug manufacturers to print maximum retail prices (MRP) of medicines inclusive of all taxes w.e.f. 2nd October, 2006 (for drugs manufactured on or after 2nd October, 2006). Copy of the order is enclosed for your ready reference.

        This will mean, that the MRP printed on the product pack will be inclusive of all taxes and levies including VAT and the final consumer should get the medicines at the MRP price.

        Sale price for the purpose of medicines has been defined in Explanation IV to section 2(25) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act) which reads as under:

"The amount of valuable consideration paid or payable to a dealer for the sale of drugs specified in entry 29 of schedule C shall be the maximum retail price printed on the package containing the drugs."

        To effectuate the amendment carried out to the 'MRP' pricing of medicine by The Drugs (Price Control) Amendment Order, 2006, the MRP printed on the pack will have to include the local sales tax also. Therefore, while levying VAT on 'MRP' basis in the State of Maharashtra, it will result into 'tax on tax". Surely, VAT is introduced to do away with such anomaly in the taxation system.

        Further, if the above definition of sale price for drugs is not amended the manufacturer/importer of medicines in the State of Maharashtra, practically will not be able to recover the VAT from his customers.

        We, therefore, suggest that rule 57(1) be suitably amended to provide for calculation of tax on MRP of medicine applying the formula and that tax may be allowed to be collected separately by the manufacturer/importer of medicine.

        We request you to look into the matter and amend the definition of 'sale price' suitably for the purposes of 'drugs and medicine' in the MVAT Act.

        Thanking you,

Yours faithfully,
Rajat Talati

Attn. : Mr. Dilip Dixit, Jt. Commr. of Sales Tax (HQ), Mumbai

Fax No. : 23713754

Fax from : Rajat Talati

Subject : Taxation of Medicines after 2nd October, 2006

Ref. : Our letter dt. 14-9-2006 filed with Commissioner's office on 15-9-2006

        As you are aware, Ministry of Chemicals & Fertilisers, Government of India, Department of Chemicals and Petrochemicals has issued Order No. 946(E) dated the 26th June, 2006 making it mandatory for all the drug manufacturers to print maximum retail prices (MRP) of medicines inclusive of all taxes w.e.f. 2nd October, 2006 (for drugs manufactured on or after 2nd October, 2006). Copy of the order is enclosed for your ready reference.

        This will mean, that the MRP printed on the product pack will be inclusive of all taxes and levies including VAT and the final consumer should get the medicines at the MRP price.

        Sale price for the purpose of medicines has been defined in Explanation IV to section 2(25) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act) which reads as under:

"The amount of valuable consideration paid or payable to a dealer for the sale of drugs specified in entry 29 of schedule C shall be the maximum retail price printed on the package containing the drugs".

        In the circumstances and to do away 'tax on tax' the circular instructions is issued to enable the manufacturer and importer of medicine to levy tax on medicine at MRP value after claiming deduction as provided in Rule 57(1). Further, other circular instructions in respect of taxation of medicine will continue to be applied as it is in the changed circumstances.

To

Talati & Co., C.A.
4th Floor, Victoria Building,
27, S.A. Brelvi Road, Fort,
Mumbai – 400 001.

No. VAT/MMB-1006/156/Adm-3/B-69                     Mumbai, dt. 27-11-2006

Sub : Taxation of Medicine after 2nd October, 2006

Ref : Your letter dt. 4th September, 2006

Sir,

        With reference to subject matter cited above, the undersigned is directed to inform you, that effect will be given to changes in DPCO and to the Hon. Supreme Court judgment in due course.

        Yours faithfully,

S. D. Bhandare
Sr. Deputy Commissioner of Sales Tax
(Act & Rule) Maharashtra State, Mumbai

Ref.No.47/2006                                                Date : 31st August, 2006

To

The Joint Commissioner of Sales Tax
Mazgaon,
Mumbai – 400 010.

Sub : Grant of permission to maintain the record of the Bills/Cash Memo in Electronic Form u/s. 86(5) of the Maharashtra Value Added Tax Act, 2002

Ref : M/s. Dhoop TIN = 27440367530V/C

        I am concerned for the above said Dealer and for and on behalf of and under their instructions, making this request application to your Honour u/s. 86(5) of The Maharashtra Value Added Tax Act, 2002, to kindly permit the above said dealer to maintain the records of Bills and Cash Memo electronically on computer media and exempting them from keeping counterfoils or duplicates of the said Sales Bills and Cash Memo and also of signing the same.

        The above said dealer states that for your such an act of kindness, it shall remain indebted to your goodself.

        Thanking you,

Yours truly,

Mahesh P. Kaku
Advocate, High Court

Ref.No.63/2006                                            Date : 12th December, 2006

To

The Hon'ble Commissioner of Sales Tax
Mazgaon, Mumbai – 400 010.

Sub : Grant of permission to maintain the record of the Sale Bills/Cash Memo in Electronic Form u/s. 86(5) of The Maharashtra Value Added Tax Act, 2002

Respected Sir,

        I by my letter bearing reference No. 47/2006 dated 31st August, 2006, made an application in reference to above caption, in the office of the Ld. Joint Commissioner of Sales Tax (II), on 18th September, 2006. However till date I have not neither received any such permission nor any communication.

        On making several personal inquiries about the status of my said application, I was told they are awaiting certain guidelines in this regard, from the office of your goodself.

        I am forwarding you, copy of said application for your kind and immediate attention. Since the law is new, may I request your honour to kindly clarify the above issue at the earliest.

        Thanking you,

Yours truly,