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Govt mulls uniform labelling for drugs

Shweta Rajpal Kohli

The government is considering a proposal to make it mandatory to have uniform labelling inclusive of all taxes for all scheduled and non-scheduled drugs. The proposal is likely to be incorporated in the forthcoming Drug (Prices Control) Order, 2002, to be enacted soon.

The ministry of chemicals and fertilisers has convened a high-level meeting on April 29 to discuss the issue.

The meeting will be attended by the chemicals and petrochemicals secretary, the health secretary, the National Pharmaceutical Pricing Authority chairman, the consumer affairs secretary, and the revenue secretary.

The proposal says the price of the drug, excluding local taxes, will be set by the government. Manufacturers and importers will then include all taxes and duties to arrive at a maximum retail price.

According to the Drug (Prices Control) Order, 1995, the labels on formulations intended for sale have to display the words "retail price not to exceed" preceding the retail price and the words "local taxes extra" succeeding it.

Industry representatives feel that the present system of collection of local taxes over and above the retail price causes unpleasant disputes leading to complaints with consumer organisations.

They contend that several taxes have to be paid at various stages between the manufacturer and the consumer and the process of recovery is complex and beyond the ordinary consumer's ability to comprehend.

In order to sort out the issue, attempts were made to get drugs notified as "declared goods" under Section 14 of the Central Sales Tax Act, 1956. This would have facilitated a uniform levy of sales tax on drugs.

However, when the finance ministry consulted various state governments on the issue, they expressed reservations and the proposal was not pursued.

Later, a working group consisting of members from the industry, consumer organisations and representatives of the All-India Organisation of Chemists and Druggists was constituted in February 2000 to look into the issue.

The working group in its report recommended the concept of adding to the price a weighted average tax to be calculated after taking into account the incidence of various local taxes charged by different states.

The recommendation was forwarded to the law ministry, which said it would not be legally sustainable to provide a weighted average for the sales tax.

The issue was also discussed at the meeting of the high-powered price monitoring board chaired by the Cabinet secretary in July last year.

The board asked for a status note on the subject. Accordingly, a status note 'Marking of MRP and local taxes on the label of container of medicines' was submitted to the board in September last year.

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