Sl. No

Issue

Amendment required in

Suggestions

Central Excise & Service tax

1

Inverted Duty structure on Pharmaceutical products (Solid dosage forms)

Presently Solid dosage forms are subject to 6% excise duty under chapter 3004. Whereas inputs/capital goods/Input services are subject to a higher rate of duty of 12.5%/15%. This leads to a huge accumulated credit in the hands of the manufacturer.

Tariff structure/Refund provisions

1.  In view of the impending GST implementation next year, the Government should refund the entire accumulated credit balance instead of allowing the same to be carried forward as the problem may continue under GST as well.

2. Alternatively if GST implementation is being postponed, input duties on API should be brought down to 6%.

2

Presently central excise & customs exemptions are provided to Scientific and research institutions only on specified items

Notification No 10/97-CE dt 1 3 97/Notific. 51/96-Cus dt 23 7 96

This should be extended to all the items used in R&D based on self-certification and approved by DSIR.

Basic customs duty should also be exempted in its entirety.

2A

Presently Cenvat credit is being denied by Excise department on input services which are used in in house R&D centers (located outside the factory) of Pharma companies which are transferred to manufacturing locations through Input service distribution mechanism.

Rule 7 of the Cenvat credit rules, 2004

Suitable clarification to be issued to allow the credit on such cases as ultimately the in house R&D activities are linked to the manufacturing activities. Merely because they are located outside the factory, credit should not be denied.

3

Presently technical testing and analysis services (relating to drugs) provided to overseas customers are not treated as export of services and are subject to tax as the Place of provision of such services is deemed to be in India.

Service tax - Rule 4 of the Place of Provision rules 2012.

Since services are provided to a foreign company and foreign exchange is earned on this transaction, this should be treated as export only and hence Rule should be suitably amended to treat such transactions as export of services.

Customs & EOU

4

Spent solvents which are cleared form EOU units manufacturing API (Active pharmaceutical ingredients) as waste or remnants are being subject to full rate of Excise duties treating them as by products and concessional duty is not being allowed under notification No 23/2003-CE.

Notification No 23/2003-CE dt 31 3 2003

Under Foreign Trade policy, Waste can be cleared in Domestic tariff area at concessional rate of duties. Hence suitable clarification should be given by the Government to confirm availability of concessional duty benefit to Spent solvents which are nothing but waste and cannot be further used in the API manufacturing.