The goods tax was imposed over a month ago on all incoming and outgoing vehicles carrying 22 categories of goods. The pharmaceutical industry, which was the worst affected, protested against the tax forcing the government to put the policy on hold since April 28, three days after it was imposed.

The pharma industry had threatened an exodus from the state and expressed fears of a collapse of the upcoming industry in the state if the hefty tax of Rs.5 per kg on incoming goods and an additional Rs.5 per kg on outgoing goods was not removed.

Each truck carrying pharmaceutical goods across the state's borders was being asked to pay Rs.20,000 to Rs.50,000.

"Such a tax has not been imposed anywhere in India and will make the pharmaceutical industry unviable, forcing us to close shop in the state," Arun Rawat, general secretary of a local industries association, had earlier told IANS.

The hill state is said to be the future destination of the pharmaceutical industry.

Currently almost 60 pharmaceutical units, including top multi-national brands, are producing drugs in the state. Around 750 more such units have registered to start production soon, largely due to a tax holiday incentive of the government.

Sources in the state excise department, not wishing to be named, said the department has recommended the abolition of this tax and were hoping that the cabinet approves its decision in its next meeting.

The state government had been expecting to make around Rs.100 million per year by the levy.