Budget 2013: Cut excise duty on inputs to 6%, says OPPI

NEW DELHI: The Organisation of Pharmaceutical Producers of India( OPPI) has pitched in for the rationalisation of central excise duty rate of inputs ( Active Pharmaceutical Ingredients or API) from 12% to 6% and made at par with Pharma goods in Budget 2013.

Alternatively, the government 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, said OPPI.

At present, the levy of central excise duty is at 12% (plus 3% Cess) on the inputs (Active Pharmaceutical Ingredients or API) whereas the output (Pharma formulations) is subject to central excise duty of 6% (plus 3% Cess).

OPPI legitimised its demand by stating that the inverted duty rate structure has resulted to a huge accumulation of Cenvat Credit for manufacturers especially those who are not engaged in exports or have minimal exports and cater only to the domestic market.

Moreover, the higher rate of central excise duty on inputs as compared to the duty on finished goods manufactured(i.e. formulations) has led to accumulation of Cenvat Credit for the pharma formulation manufacturers as the duty paid on inputs cannot be set off against the output central excise duty liability inspite of value addition on finished goods.

There is no provision to get refund of the accumulated Cenvat Credit, which eventually could be a cost to such Pharma manufacturer, added OPPI.