Majority of the FMCG stocks are trading weak led by Procter & Gamble Hygiene & Healthcare and Lakshmi Energy. Jyothy laboratories and Hindustan Unilever are among the few stocks trading in the red. As per a leading financial daily, the Income Tax Department has ordered several multinational companies mostly in the FMCG space to pay taxes on advertisement, marketing and sales promotional expenses (AMP) expenses incurred over and above the industry average. The tax department's argument in this case is that if an Indian subsidiary of a foreign multinational spends more than the average AMP expenses then the additional amount is going towards brand promotion and in turn creating marketing intangibles. Therefore the additional amount should be chargeable to tax under transfer pricing. Based on this additional ad-spend, companies like Hindustan Unilever, Procter & Gamble, L'Oreal, LG and Maruti Suzuki face tax demands. This move has been challenged in the Delhi High Court and the decision is expected in the next ten days. Apart from this multinational companies have also approached the Income Tax tribunal in this regard.
Domestic pharma stocks are trading mixed with Dishman Pharma and Wockhardt being the biggest gainers. However, Biocon and Glenmark Pharma are among the major losers. As per a leading financial daily, the US Food & Drug Administration (USFDA) has issued a ban on products from the manufacturing facilty of IPCA Laboratories in Ratlam, Madhya Pradesh. The company's facility received regulatory observations in July last year following inspection by USFDA. As a result the company had voluntarily suspended the shipments of the active pharmaceutical ingredient (API) from the facility to the US. With the situation remaining unresolved, the import alert has been issued by USFDA. IPCA has clarified that four API's namely Hydroxychloroquine Sulphate, Propanolol Hydrochloride, Trimethoprim and Ondansetron have been excluded from the import alert.