Mumbai: Indian pharmaceutical firms are seeking more sops for research and development (R&D) work in the country and extension of export-based tax exemptions in the Union Budget on Monday, industry officials and analysts said.
The drug industry, which is a net exporter, enjoyed a tax break on its export-oriented units, which expired in April 2009. “The exemption beyond FY2010 will provide some relief to the export oriented sectors (like IT and pharmaceuticals), which have been reeling under the pressures of the rising rupee,” brokerage Sharekhan said in a report.
The rupee has risen 1.5% against the dollar this year, hurting drugmakers’ rupee-based returns.
“No questions on that, EOU benefits should continue for at least 3-5 years because exports are coming down,” added R. Sankaraiah, executive director-finance with Jubilant Organosys Ltd.
Pharmaceutical firms are also hoping the government will ease tax rules to encourage research investments. Currently, the companies can avail of tax exemptions of up to 150% of the funds spent on in-house research.
They are seeking an increase in the tax break to 200% and have asked the government to include expenses on research or clinical trials done outside the R&D unit in the exemption.
“Considering the long term benefits of R&D to the economy at large, all excisable goods used for R&D purposes, should be exempted from central excise duty,” the Indian Drug Manufacturers Association said in its pre-budget memorandum.
Drugmakers have also asked the government to maintain excise duty on finished drugs at 4% and that on bulk drugs cut to 4% from 8%.
The industry has also sought the removal of duties on life saving drugs, such those used to treat AIDS, cancer and tuberculosis, according to the memoranda submitted by the industry to the finance minister.