Mr. Sujay Shetty, Associate Director – Pharma Practice, PricewaterhouseCoopers

Lowering of central excise duty on medicines from 8% to 4% in late 2008. Prior to that excise duty was as high as 16%.

Lowering the custom duty to half has resulted in growth of pharma industry by 15% over the last fiscal year. This has also levelled the playing field for companies that had their plants outside the excise-free states, such as Himachal Pradesh, Uttaranchal and Sikkim, where pharma companies enjoyed tax holiday for 10 years. There is a recommendation by the Department of Pharmaceutics to further continue the 4% excise relief this fiscal year. Industry also seeks removal of excise duty on bulk drugs & formulation of Anti-AIDS, Anti-Cancer, Anti-TB and other life-saving drugs to make these medicines more affordable to common man.

Basic customs duty on nine life-saving drugs (used for treating breast cancer, hepatitis B, rheumatic arthritis, etc), bulk drugs and on Influenza vaccine reduced from 10% to 5% with ‘Nil’ Additional Customs Duty. While, basic customs duty on artificial heart was lowered from 7.5% to 5%.

Given that lifestyle diseases are on a rise in India, lowering customs duty on certain life saving drugs will benefit the common man by making these expensive drugs more affordable in India.

Tax holiday for 100% EOUs extended for 1 year ie upto March 31, 2011

This came as a relief to exports business which was badly hit during the global financial crisis on account of volatility in the Rupee. This would encourage exports. However, this needs to be further extended as the withdrawal of the exemption beyond 2011 shall adversely affect those companies who are in the process of converting their existing undertaking into a 100% EOU, and those who do not have adequate means to move or set up.

For pharma manufacturing units, there is an additional weighted deduction of 150% for expenditures relating to in-house research and development. Further, recently, a new provision has been added to provide 125% weighted deduction for expenditure incurred towards outsourcing of R&D activities.

Given that drug discovery and development in pharma industry is highly capital intensive, weighted deduction will give the much needed impetus to pharma R&D and innovation activities in the country. Outsourcing in India is moving up the value chain and we are already seeing greater R&D collaborations with the big pharma companies. Industry though seeks greater R&D sops in the forthcoming budget.