Pharma wants exemptions on R&D

RUN UP TO THE BUDGET 2004-05

The domestic pharmaceutical industry, which is gearing up for a product patent regime, has made a strong pitch for tax exemptions on investment in research and development (R&D) activities.

The over Rs 25,000 crore pharma industry is also looking for a detailed guideline on the implementation of the value added tax (VAT) regime in the forthcoming Budget.

Ranjit Shahani, vice-chairman of Novartis India and president of Organisation of Pharmaceutical Producers of India (OPPI), said, "As an industry, we are very happy to see the government allocating 2 to 3 per cent of GDP towards healthcare."

Industry organisations, including OPPI and Indian Drug Manufacturers' Association (IDMA), have presented their pre-Budget memoranda to the finance ministry.

IDMA has suggested the excise duty on allopathic as well as ayurvedic drugs and pharmaceutical should be brought down from the present level of 16 per cent.

The bulk drugs and formulations falling under categories of anti-AIDS, anti-cancer, anti-TB, immune suppressants and other life-saving drugs may be totally exempted from the excise duty.

The association also highlighted the need for exemption of customs duty and countervailing duty on raw materials imported for production of anti-AIDS drugs.

IDMA feels that all in-process materials, if consumed captively for manufacturing exempted products, should be exempted from levy of excise duty.

OPPI has recommended a reduction in the basic custom duty on drug intermediates and bulk drugs to 10 per cent and on formulations to 20 per cent from 25 per cent duty on each of these categories. According to OPPI, the health sciences sector should be entitled to specific tax holiday, particularly for export and R&D.

Indian Pharmaceutical Alliance (IPA) has recommended exemption of excise duty on capital goods acquired for the purpose of R&D. Also, expenditure incurred on setting up research facility should qualify for weighted deduction.

It has also suggested that income from intellectual property rights related issue should be treated at par with income from export of goods, and hence, be entitled to income-tax exemptions.