Pharma and Budget: Why pharmaceuticals and life science could be the centre of focus in Budget 2021

January 26, 2021 5:45 AM

Union Budget 2021 India: From an indirect tax perspective, the government could make healthcare affordable by ‘zero-rating’ healthcare services to further incentivise healthcare services, as also lower the GST rates.

Budget 2021-22: Taking a cue from the electronics sector where the government has not only attracted global players, but also provided an ecosystem to augur growth, the pharmaceuticals sector needs to be supported with a similar ecosystem.Budget 2021-22: Taking a cue from the electronics sector where the government has not only attracted global players, but also provided an ecosystem to augur growth, the pharmaceuticals sector needs to be supported with a similar ecosystem.

By Hitesh Sharma

Indian Union Budget 2021-22: The Covid-19 pandemic has brought the need for constant innovation, seamless supply chain and robust manufacturing capabilities to the forefront for the pharmaceuticals and the life science sectors. Governments across the world are realising the need of being self-reliant in the sector, and India is no different.

The launch of the Medical Devices Park and the Production Linked Incentive (PLI) scheme for the promotion of domestic manufacturing of critical key starting materials (KSMs)/drug intermediates (DIs) and active pharmaceutical ingredients (APIs) were in line with the same realisation.

In the upcoming Union Budget, these need to be further augmented:

Incentivise research and development

It is long overdue, and India should participate in the innovation area at a global level. Along with a scheme similar to the PLI, the government should consider tax incentives to attract innovation, and 200% tax deduction can be brought back by the government.

Attract global investment

Taking a cue from the electronics sector where the government has not only attracted global players, but also provided an ecosystem to augur growth, the pharmaceuticals sector needs to be supported with a similar ecosystem. Interaction with industry and global players would do well to make India move from a generic manufacturer to an innovator developer and manufacturer for the world.

Enabling digital transformation

Technology/digital transformation is another key area of focus. In fact, it would be the building block for the much-expected universal healthcare in the country.

Stable pricing policies and tax certainty

The government may also look at solving issues such as introducing stable pricing and policy environment favourable for long-term investment decisions, coupled with lower margins due to government pricing policies, reducing dependency on imports, increased public and R&D spending, etc. Another area that would help the sector is having some tax certainty. The government could consider regularising PE risk on account of mobility restriction under various scenarios. From an indirect tax perspective, the government could make healthcare affordable by ‘zero-rating’ healthcare services to further incentivise healthcare services, as also lower the GST rates.

Tax deduction on CSR expenses

To promote donations, corporate social responsibility expenses could be considered as a deduction from taxable income.
The sector has played a pivotal role in the unprecedented Covid-19 pandemic crisis. Pharmaceuticals and life science could be the centre of focus in Budget 2021, as an immunity booster or an antibody for the economy, and to gear-up and be self-reliant for such unprecedented times in the future—truly making India atmanirbhar in the health domain.

The author is partner & national tax leader, Life Science Sector, EY India

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