A new weight tax by Himachal Pradesh on pharmaceuticals and drinking water companies has virtually put a stop to the tax holiday they were enjoying by investing in the state.

The new tax would be charged with immediate effect by the government on the total weight of goods being sent by these units by road. The state excise and taxation department notified it this week.

The government has imposed a tax of Rs.5 per kg on pharmaceutical products and Rs.5 per 10 litres of packaged drinking water.

Pharmaceutical manufacturers who had arrived in this industrial belt in hordes since the beginning of 2005 from all over India to take advantage of a tax holiday said they were "shocked" by the decision.

"No thought seems to have been given while applying this tax. Liquid syrups and bottled medicines weigh a lot. Companies that had invested here to enjoy a tax holiday would not find things attractive any longer," said P.S. Chhatwal, the managing director of Torque Pharmaceuticals.

Pharma manufacturers said that clubbing the heavier liquid medicines with tablets and capsules for imposing weight tax was unjustified.

Packaged drinking water manufacturing companies would have to pay a tax of 50 paise per bottle in future. "This will make mineral water even costlier," said a manufacturer.

There were nearly 650 pharmaceuticals manufacturers who had lined up for Baddi and other industrial belts in Himachal where a 10-year tax holiday on excise and income was given by the central government to attract industrial investment.

But after the weight tax, many are crying foul.

Pharma manufacturers say a loaded nine-tonne truck carrying tablets or capsules worth Rs.1 million would attract a weight tax of Rs.50,000.

"A truck of the same weight carrying liquid formulations worth just Rs.300,000 would also attract a tax of Rs.50,000. My manufacturing unit in Punjab would cost cheaper for liquids. Why should I invest millions of rupees in Himachal?" Chhatwal told.

"A glucose bottle costing Rs.8 would attract a tax of Rs.10 per bottle as it is heavy. Who will justify this taxation?" asked another manufacturer.

Manufacturers said nowhere in the world were medicines taxed on the basis of weight. They said any tax should be based on the invoice value.

Pharmaceuticals manufacturers based here and those coming up with new units rushed off to Shimla Friday to complain to the chief minister and officials that the new tax would choke the industry.

Thirty-four pharmaceutical units were already in production till January this year. More came in subsequently.

But their plans have now been disturbed by the "weight tax" of the Himachal government.

Nearly 300 of the pharmaceutical units were at an advanced stage of construction and were to begin production later this year.

"This taxation, if not withdrawn, would lead to the exodus of pharmaceutical companies from Himachal as fast as they came," another manufacturer said.