Pharma firms want tax cuts, R&D sops boost
Drugmakers want tax exemption deadline for export oriented unit (EOUs) to be extended and want infrastructure or priority sector status in the budget on Feb 28.
February 28, 2011 / 08:20 IST
Drugmakers want tax exemption deadline for export oriented unit (EOUs) to be extended and want infrastructure or priority sector status in the budget on Feb 28.
The deadline for full exemption of tax on net profit for export oriented units, or EOUs, ends in March, though drug-making facilities in special economic zones would not be affected.The exemption beyond March 2011 will provide relief to companies like Dishman Pharmaceuticals and Chemicals, Divi's Laboratoriess, Cipla and Torrent Pharmaceuticals, which run EOUs.The government may grant infrastructure or priority sector status to healthcare, which would help draw more investments and lower costs, NR Munjal, president, Indian Drug Manufacturers' Association, told Reuters."The output of R&D is still considered as an intangible asset and hence, banks or financial institutions are not ready to support R&D projects. The government should either make certain norms for funding or set up a venture capital fund," he said.Pharma companies, with annual sales of over Rs 1 lakh crore including exports of Rs 45,000 crore, spend 4-7% of their revenue on R&D against 12% by their Japanese counterparts and more than 14% by the Chinese.The last budget had raised weighted deduction on in-house R&D expenses to 200% and the industry hopes it would be extended to cover outsourced projects such as clinical trials and specific lab studies, including those incurred overseas, brokerage Sharekhan said in a note.The move will incentivise investment in R&D and encourage new drug development, it said, adding it would prove positive for Biocon and Piramal Life Sciences, both major outsourced R&D segment players."We expect government to have an equal excise duty for APIs and formulations as this will help the smaller players who primarily depend on APIs," Kamlesh Udani, executive director, JB Chemicals and Pharmaceuticals, told Reuters.The duty on active pharmaceutical ingredients (APIs) is 10% while its 4% for formulations or finished dosages."An equal duty structure for both APIs and formulations would help draw parity between the big and small players in the industry," said Sushant Dalmia, analyst with Pinc Research. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
