Budget 2025: Pharma players want tax cuts, stronger support for R&D, higher healthcare spend

Executive expect the healthcare spending to make up atleast 2.5-3% of the upcoming Union Budget of 2025.

Indian pharmaceutical and hospital majors are pinning their hopes on Finance Minister Nirmala Sitharaman to deliver a booster dose for the sector with higher healthcare spending in the upcoming Union Budget. The sector is also eyeing tax breaks on research and development, as many firms shift focus to complex drugs.

Support for R&D

Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, advocated for allocating at least 10 percent of the National Research Fund to life sciences and reinstating 200 percent weighted deductions for R&D expenses.

On similar lines, Ameera Shah, Promoter and Executive Chairperson of Metropolis Healthcare, called for increased incentives for R&D in diagnostic technology to position India as a global healthcare innovation leader.

Increased healthcare spending

The healthcare industry continues to push for higher budget allocations, seeing it as a crucial measure for bolstering healthcare infrastructure. With the Union Budget approaching, these expectations are gaining momentum once again.

"An increase in the healthcare budget allocation to 2.5-3 percent of GDP is crucial for strengthening healthcare infrastructure, which will benefit both innovation and access to care across the country," said Himanshu Baid, Managing Director, Poly Medicure.

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Baid further added that the government may consider standardising the GST rate of 12 percent across all medical devices to would simplify the tax structure, ensuring consistency and ease of doing business.

Meanwhile, Baid also suggested the government to enhance export incentives under RoDTEP scheme (Remission of Duties and Taxes on Exported Products) to 2-2.5 percent, up from the current range of 0.6-0.9 percent to help bolster the global competitiveness of Indian-made medical devices, enabling manufacturers to expand their reach in international markets.

Demands from the hospitals and diagnostics sector

Top executives of hospital majors are pushing for an Infrastructure Linked Incentive (ILI) for new hospitals, reductions in GST for essential services, and lower customs duties on advanced cancer treatment drugs and devices.

Suneeta Reddy, Managing Director of Apollo Hospitals, highlights the burden of input GST, which escalates costs by 8-10 percent. She suggests reducing GST on key input services like lease rentals, housekeeping, and man power to 5 percent.

To address the shortage of hospital beds, Reddy vouches for an ILI scheme similar to the PLI framework. "The government can consider an incentive of 50 percent on the cost of capex incurred for infrastructure creation of any new hospital over 100 beds as an additional allowance to be set off against the company’s tax payable. This can significantly facilitate faster capacity creation in the industry which will bode well for the patients and the population at large," says Reddy.

Meanwhile, diagnostic companies are also calling for an increase in tax exemptions for preventive health check-ups from Rs 5,000 to Rs 10,000, with the benefit extended to multiple family members, fostering a culture of preventive healthcare.

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