New Delhi: Though the Budget for 2016 presented by the Finance Minister, Mr. Arun Jaitley, is to be looked at positively for its extension of healthcare benefits to the masses with its new insurance scheme, affordable kidney treatment and a 10 % tax deduction on patents developed in India, there exist lacunae that need to be looked into.
Taking up the pharmaceutical division of Health Care one finds the minister’s budgetary allocations wanting in nature. The government’s announcement to lower tax benefits on research and development is a bit worrisome according to the pharma industry. The major setback in the budget is withdrawal of tax deduction on research and development expenses.
Presently companies enjoy a tax benefit of 200% on research expenses , however, the government has decided to reduce the deduction to 150% in April next year and 100% by the year 2020. The reduction in tax exemption implies an increase in tax rate for pharma companies. Some private companies spend 12 % on research and development.
The Finance Minister, Arun Jaitley,has proposed a ten per cent tax rate on income from patents developed and registered in India; the area of concern for the pharma industry remains the total lack of concern by the government to address the issue of recent increase in import duty on medical equipment and devices. Since the medical technology sector is in the stage of infancy with manufacturing limited to less complex devices, more than 75% of medical equipment / devices are imported and therefore, healthcare costs would rise with an increase in duty. The government also needs to pursue its proposal to establish a separate ministry for pharmaceuticals to end the current confusion and chaos in the sector due to multi-ministerial control.
Ensuring that the health protection scheme acts as a catalyst for investment in the healthcare sector, thereby, improving access & affordability of quality healthcare, is another area that the government needs to ponder upon.
In the R & D and medical education sector of healthcare there is need to work out ways to prevent brain drain to tier-I cities and other countries in pursuit of specialised education and career opportunities in nursing, pharma, physiotherapy, paramedical sciences. This could be done by increasing budget allocation to modernise medical education.
Tax SOP’s for units focusing on R&D and an improvement in patent laws also need to be looked into.