Sops fail to inject relief

Industry seeks more exemptions to boost research.

The Union Budget 2010-11 has failed to impress the pharmaceutical and healthcare industry despite Finance Minister Pranab Mukherjee’s proposals for higher tax incentives on research and development (R&D) and duty concessions for medical equipment imports.

Lauding the budgetary proposal to increase the weighted deduction of 150 per cent on the R&D expenditure to 200 per cent, industry leaders said the exemption should have been more to encourage the research programmes.

“A deduction of at least 300 per cent would have resulted in much greater benefits. The industry was also looking forward to an increase in healthcare infrastructure, with creation of focused special economic zones (SEZs), and tax holiday on exports. Both of these have remained unaddressed in the budget,” said Kamal Sharma, managing director, Lupin Ltd, a pharmaceuticals company.

The budgetary proposal to prescribe a uniform, concessional basic duty of 5 per cent, counter veiling duty (CVD) of 4 per cent with full exemption from special additional duty on all medical equipment has also been criticised.

“The industry has been asking for removal of these benefits (low custom duty) and exemption as these exemptions are not available for raw material and packing material used for making these items to the manufacturer, with the result that cost of indigenous manufacturer is higher than imports and the medical devices industry continue to be import dependent,” said Rajiv Nath, coordinator of the Indian Medical Device Industry.

The budgetary proposal was aimed at making ‘state-of-art equipment ‘available at a lower cost through exemptions and lower duties.

The minister, however heeded to the request of orthopaedic implants manufacturers to exempt inputs from import duty thereby turn their finished products competitively priced vis-à-vis the imported orthopaedic implants.

Gaurav Khungar, India head for pharmaceuticals, KPMG, said the proposed increase in the minimum alternate tax from 15 per cent to 18 per cent would have a negative effect on domestic pharmaceutical companies, especially those companies that currently avail fiscal exemptions.

“We don’t see any bold initiatives (for the healthcare sector) in this Budget, except for some reduction in duties on medical equipment. However, a robust economy and more money in the hand will indirectly have a beneficial impact on the healthcare sector,” said Shivinder Mohan Singh, managing director of Fortis Healthcare.