Ramnath Subbu

Life-saving drugs should have been fully exempted from customs duty to reduce price

MUMBAI: The pharmaceutical sector, which was almost ignored in the Union Budget 2006-07, has reason to feel aggrieved with the latest budget, which once again failed to address issues concerning the industry.

While the tax exemption for research and development (R&D) has been extended for five years up to 2012, Ranjit Shahani, President, Organisation of Pharmaceutical Producers of India (OPPI), and Vice Chairman and Managing Director, Novartis India, in a statement said the exemption should have been given up to 2017, "since the pharmaceutical discovery process is risky and lengthy and takes anywhere between 12 and 15 years.''

D. G. Shah, Secretary General, Indian Pharmaceutical Alliance (IPA), told The Hindu, "The industry is also looking for higher weighted deductions than the 150 per cent prevailing but that does not happen. There are certain expenditures that have not qualified for weighted deductions like for overseas filing of patents, overseas clinical trials and land dedicated for R&D, which does not even qualify for depreciation,'' Mr. Shah said.

However, among the positives are: the exemption from the 12.5 per cent service tax for global clinical trials mainly for clinical research organisations.

Secondly, the Fringe Benefit Tax for physician samples, which were not a benefit to employees, has been correctly withdrawn after two years. Also, the import of R&D equipment for laboratories was taxed at 5 per cent for public sector labs, while it was at 7.5 per cent for private labs and that has been brought to a uniform 5 per cent.

According to Mr. Shahani, life-saving drugs should have been fully exempted from customs duty to reduce price.