Domestic pharma companies on Tuesday asked the government to extend the tax exemptions for standalone R&D units. The drug makers, including Ranbaxy Laboratories Ltd, Worckhardt Ltd and Nicolas Piramal India Ltd (NPIL), have asked the government to cover outsourced R&D for pharmaceutical products to support the high-risk capital-intensive segment to encourage the entrepreneurs.
?We have requested the finance minister to cover standalone R&D units under weighted deduction under section 35 (2B). Such move would help pump in greater investments in the high-risk business,? Malvinder Mohan Singh, chief executive officer and managing director of Ranbaxy Laboratories, told FE after a meeting with finance minister P Chidambaram.
Section 35 (2B) provides weighted deduction of 150% for expenditure incurred on scientific research by certain industries, including drug manufacturer, pharmaceuticals, and chemicals.
?In order to continue to encourage in-house R&D programmes, we suggested amendment in Section 35 (2B) and delete the condition that the R&D company must also be engaged in manufacturing or production,? said NPIL director (strategic alliances and communications) Swati Piramal.
There is no reason why both manufacturing and R&D have to be combined in one legal entity: once the research is successful and an innovative product comes out of the facility, commercial manufacturing can be dome by another company which will not be entitled to the weighted deduction, she added.
Wockhardt chairman Habil Khorakiwala said large capital was needed to carry out scientific research and the government must work towards providing tax benefit to the stand-alone R&D units. The scope should also be widened to encompass all expenditure incidental to basic research carried on at any outside R&D facility, he said.
Recently few composite pharma companies have hived off their R&D divisions to limited companies. Judging from the response for such companies, it is clear that there is huge potential for such companies to carry out their innovations on a large scale, said an expert.