Pharma cos disappointed with no expected cut in excise duty in Budget 2007
Our Bureau, Bangalore

Pharmaceutical companies are disappointed with the Union Budget 2007 as it has no proposal to rationalise excise duty on medicines. By retaining the excise duty rates at 16 per cent, pharma manufacturers in the non excise free zones will have to continue to put up with the unfair market conditions stated Jatish N Seth, director, Srushti Pharmaceuticals and secretary, Karnataka Drugs and Pharmaceutical Manufacturers Association.

The ESOPs to be taxed and Dividend distribution tax hiked to 15 per cent are also viewed as major blows to the drug manufacturers, stated Seth.

The support to R&D with a five year tax holiday is of no use to companies, because no drug can be developed in five years. Seth said that announcements like exemption of the weighted average tax which leads to a five year exemption to private research bodies, exemption of service tax for clinical trials and new drug development, Technology biz incubators exempt from service tax and venture capital support will not have any impact on pharma manufacturers in the medium and small scale segment. The country is mainly represented by this segment and such benefits would only favour the large players.

According to Shailesh Siroya, managing director, Bal Pharma, the pharma manufactures in the states with tax holidays will enjoy the concessions, but those in the other states have nothing to look forward. The R&D and clinical trial service tax exemptions will benefit medium players. The pharma sector now has only about two or three benefits from the Union Budget 2007: Reduction in pharma machinery from 7.5 per cent to 5 per cent and import duty reduction for drug intermediates.

A spokesman of small scale drug units stated that the scene is doomed with no excise duty exemption. The sector had made several representations for either reduction in excise duty or zero excise regime, besides lobbying against the drug price control order on the 223 out of 354 drugs.

Suresh Khanna managing director, Dossier Solutions and Services Pvt. Ltd., stated the only service tax deduction in clinical trials for new drug development and the R&D exemption could be appreciated in the Union Budget 2007. With regards to excise duty the disparity between companies at excise free zones and non-excise zones continues and this was a big disappointment, he added.

Source: www.pharmabiz.com
1st March 2007

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