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Patent Tax Rebate Encourage Drug Makers, While R and D Tax Discourages

Patent Tax Rebate Encourage Drug Makers, While R and D Tax Discourages

Mumbai: Finance Minister Mr. Arun Jaitley’s Budget announcement for a 10 % tax rebate on earnings from patent filings is an encouraging move on the part of the government for global and big drug making companies. It comes as a boost for companies like the Sun Pharma, Dr. Reddy’s, Lupin and Wockhardt who are constantly expanding their global drug making business through new drug filings.

In his budget speech the Finance Minister made clear that since research was the driver of innovation which in turn  encouraged economic growth he was announcing a ten percent rate of tax on income on patents developed and registered in India.

According to The Economic Times the Wockhardt Chairman, Habil Khorakiwala cautioned that if the move attracted Minimum Applicable Taxation (MAT) the benefits of the Finance Minister’s Patent tax benefit might be neutralized.

Economic experts  welcoming  Mr. Jaitley’s announcement said that though general taxation was around 35 % , the 10% rebate would act as a significant uplift for the pharma sector.

The Government of UK had taken  a similar step a few years ago to promote innovation and manufacture .

“I think this announcement is  positive for the drug industry, as this rebate can be claimed not just on new chemical entities, but also on platform technologies”, said D G Shah, Secretary General, Indian Pharmaceutical Alliance (IPA).

Hailing the flat corporate tax structure of 25 per cent on companies which commence production after 2016,  Mr. Shah  felt it would give a fillip to drug manufacturers who might want to set up a new manufacturing facility.

The R & D’s tax deduction from the  present 200 % to 150% and the final phasing out by 2020   was looked upon with concern by all involved with Healthcare in the country. “The industry was proposing a 300 per cent weighted average reduction, so this will disappoint the pharma companies”, said Sujay Shetty, Head of Life Sciences Practice at PriceWaterhouse, Coopers (PWC).

Joining in  Khorakiwala opined, “With the benefits of research cut down and getting phased out, it will be important to review the decision.”

On a scale of ten he granted an eight to Mr. Jaitley’s budget describing it as an “overall sensible budget, but negative for pharma.”




Source: Inputs from The Economic Times
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