The Indian pharmaceuticals industry is keenly watching the Budget for 2007-08 with the hope for more tax deductions for the R&D sector. The major demand for the industry remains the 10-year extension of tax benefits granted for pharmaceuticals R&D, that came to an end last year.
With regard to the special nature of the industry, the rate of weighted deduction for pharma should be raised from 150% to 200%, demands the industry.
The industry is demanding that the expenditure on R&D works, such as clinical trials, which is incurred outside the facility, should also be considered for the weighted deduction that is allowed only for in-house R&D at present. Says DG Shah of Indian Pharmaceuticals Alliance (IPA), ?Its scope should be widened, so as to also encompass within its fold all expenditure incidental to basic research carried on at any outside R&D facility, as also clinical trials, bio-equivalence studies, etc.?
Expenditure incurred for patent filings outside India should be considered eligible for weighted deduction. Expenditure on obtaining approval from any regulatory authority and on filing an application for a patent outside India should also be considered for weighted deduction of the I.T. Act, demands IPA. Daara B Patel of the Indian Drug Manufacturers Association (IDMA) said, “In order to reduce transaction costs and to make Indian goods (exported by merchant exporters) truly competitive, rebate of service tax paid on all taxable services availed by merchant exporters should be granted.”
Extending the tax benefit in respect of profits of a 100% export oriented unit (EOU) beyond FY 2008-09 will encourage manufacturers to set up/convert more undertakings as 100% EOU, feels the industry. The eligibility limit under SSI Exemption Scheme should be increased to Rs 5 crore from the present limit of Rs 4 crore, demands IDMA.
In the last budget, the pharmaceutical industry did not receive the perfect antidote it was expecting from the finance minister, but was happy that the sector was accorded some thrust as a growth segment. The industry welcomed the move to exempt clinical trials, a high growth segment, from the burden of service taxes, and saw the increased focus on healthcare and eradication of diseases like TB, malaria and polio as a positive step. But for some, the only positive measure for the industry in the last budget was the extension of the weighted average deduction on in-house R&D by five more years. This year, they would like to see the FM take these steps to the next level.