NEW DELHI: Medicine samples supplied to doctors burned a hole in government’s tax revenues prompting the Comptroller and Auditor General (CAG) of India to seek a change in excise duty norms.
In a report presented before the Parliament on Friday, the supreme audit body said that the government lost a total of over `5 crore as revenue during the period 2005-06 to 2007-08, following 38 cases where central excise duty on physician’s samples were paid on transaction value rather than their corresponding maximum retail price (MRP)-based values.
The CAG report, which said that the transaction values were 15-62% less than their MRP values had a resultant short payment of `5.67 crore. Transaction cost is the production cost of medicines.
Assessment of allopathic physician samples are based on transaction value under section 4 instead of MRP-based value under section 4A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
Section 4A –– which requires valuation of the medicines at uniform rates both for trade as well as for physician’s use –– does not cover ayurvedic and homeopathic products even though they are sold at MRP. Had the rule 4A been made applicable for homeopathic and ayurvedic medicines, revenue receipts for the same period would have increased by `37.79 crore, the CAG said in its report.
Noting the loss in revenue, the CAG has now recommended that the government should consider amending the provisions to put in place a uniform system for assessment of all pharmaceutical products irrespective of their being cleared as physician samples or for trade. It also said that the government should consider bringing ayurvedic and homeopathic medicines under MRP based assessment.
Special economic zones have also earned the ire of the statutory auditor. In a separate report filed before the Parliament on Friday, the CAG has said that the government should prescribe norms for physical examination of goods cleared by
SEZ units so as to prevent any loss of revenue.
“We recommend prescription of norms for physical examination of goods cleared by SEZ units for adhering to the RBI requirements and to prevent any loss of revenue,” the CAG report said. As per a RBI circular issued in July 2006, customs authorities are required to examine and certify the value of goods exported in the guaranteed remittance form to be submitted by the exporters to their respective banks.
The CAG’s audit found that 10,010 consignments of total FOB value `198.30 crore were cleared for export from SEZ Surat during the period 2005-06 to 2007-08, without any physical examination. “In our opinion, the absence of any form of physical examination implies that there is no check on the risk of under-valuation/ over-valuation of goods in imports/exports,” it said.
Source : economictimes.indiatimes.com