TN pharmacists urged to join VAT regime

Chennai: The Tamil Nadu Chemists and Druggists Association has been urged all its members to become part of the VAT regime and not to opt for either exemption or compounding.

In the State, traders with turnover of below Rs 10 lakh are allowed not to register themselves for VAT. Those with turnover of up to Rs 50 lakh have the option of paying only 0.5 per cent of their turnover as tax.

At a press conference here, the President of the Association, Mr B. Arumugam, pointed out that those who do not come under the VAT regime lose out because otherwise they would have no cushion to set off input taxes. Traders who opt for `exemption' or `compounding' end up with shrunken margins.

Risks involved


But more importantly, traders who do not come under VAT regime run the risk of being hauled up by Drug Price Control authorities. This is because the label prices of retailed drugs are fixed and are inclusive of taxes. But a trader who is not under the VAT regime does not remit the tax to the Government.

For example, if a drug is priced at Rs 10, inclusive of 40 paise of VAT, a trader who is registered for VAT remits the 40 paise to the government. A retailer who has opted for compounding remits only five paise and the one who is under exemption does not remit anything at all.

Therefore, this results in unjust enrichment by 35 paise under `compounding' and 40 paise under `exemption'. Who knows, some day some authority might impose a hefty penalty on the trader, Mr Arumugam said.