After HP, Gujarat pharma cos look at tax haven Sikkim

The pharmaceutical units in state seem to be bullish over yet another tax haven in Sikkim, as the excise and other benefits no longer exist at Baddi, Himachal Pradesh, which was the favorite destination for the pharma companies.

The state pharma industry had made expansions of their manufacturing operations in other states with a view to yield benefits in excise and income tax. Many pharma units had opened their manufacturing facilities in Baddi to cash on low excise duty.

However, with excise rates in state getting reduced at par with those in Baddi, the cost benefit came to almost zero.

Speaking to FE, Kamlesh Patel, Indian Drug Manufacturers Association (IDMA) – Gujarat State Board, mentioned that benefits accrued to setting up a plant in Baddi, slowly vanished and now new destination was being emerged.

?Several pharmaceutical companies of Gujarat have opted to set up manufacturing facility in Sikkim, as they get 100% excise and income tax benefits in addition to Modvat refund from the state government.

On the top of all, the state also offers freight subsidy as well,? said Patel adding that it was mainly large units who would expand their manufacturing operations to Sikkim as the infrastructure investment and other operational costs were high enough for the small units.

Sources from the pharma industry informed that as many as 16 licenses have been issued to various companies to set up their manufacturing plants in Sikkim, of which four are said to be already operational, including a leading healthcare company from Gujarat.

However, these include only large pharma companies, while small companies still continue to grow within state limits.

Mahendra Patel, MD, Lincoln Pharmaceuticals Ltd told FE, ?Considering the market scenario, small and medium pharma units would not afford to move to other state, hence they would continue to make expansion within Gujarat.?

Patel plans to expand his manufacturing facility by setting up an additional unit nearby Ahmedabad.

Similarly, Ahmedabad based Troikaa Pharmaceuticals Ltd also plans to make investments to the tune of Rs 150 crore in two phases towards setting up of an additional manufacturing facility at Virochand Nagar near Ahmedabad.