Tax Sops For Non-R & D Firms

The pharmaceutical industry has asked the government not to restrict the 10-year tax holiday granted to research and development (R&D) companies to pure R&D companies only.

In a letter to the finance secretary, the Indian Pharmaceutical Alliance (IPA) has argued for the extension of this holiday to companies that are engaged in activities other than R&D also, as in the absence of this provision, the benefit of the 150% weighted deduction for research purposes granted to companies will be lost.

The finance minister had, in recent amendments to the Finance Bill, acceded to the demands grant a 10-year tax holiday to scientific research companies.

 

The industry has, however, asked the government to extend the holiday to manufacturing or commercial enterprises engaged in R&D activities which receive royalty income, milestone payments or licensing fees on their intellectual property also.

The benefit of the deduction will accure to to companies only if the company has other taxable income. Pure R&D companies may not have other taxable incoem to avail fo the wighted deduction. Only manufacturing or commercial enterprises engaged in R&D activities can claims this deducation.

Also, the alliance has reiterated its case for exempting R&D equipment and consumables from import duty.

"The grant of this exemption is not likely to have large revenue implications for the government," says D G Shah, secretary general of the IPA. "Total expenditure on R&D in India is around Rs 260 crore of whihc only around Rs 100 crore worth of equipment is imported," he adds.