Finance Minister brings cheers to pharma industry
Joseph Alexander, New Delhi

The pharmaceutical industry won a long-pending pat from the Government when Finance Minister P Chidambaram announced a cut in excise duty on all pharmaceutical products from the present 16 per cent to eight present and extended a number of other sops including exemption in customs duty for life-saving drugs in his all-please pre-election budget for 2008-09.

"I have looked at specific sectors where growth is flagging. These sectors are important because they are growth and employment drivers. Some of them also have large externalities. Therefore, I propose to reduce the excise duty on all goods produced in the pharmaceutical sector from 16 per cent to 8 per cent", he said in his budget speech.

"On certain specified life saving drugs and on the bulk drugs used for the manufacture of such drugs, I propose to reduce the customs duty from 10 per cent to 5 per cent as well as to totally exempt them from excise duty or countervailing duty,'' he said, bringing further cheers to the pharma industry. He also totally exempted anti-AIDS drug, Atazanavir from the excise duty.

Cut in excise duty has been one of the long-standing demands of the industry, especially with the national pharmaceutical policy seeking to put 354 drugs under price control from the present list of 74 is nearing finalization. The move would prove a relief also to the struggling small scale pharma sector which has been asking for some measures to survive.

By not bringing in fresh burdens on the industry as whole, the Finance Minister also did not antagonize a section of the pharma industry in the excise-free zones that were apprehensive of some excise duty on contract manufacturing, against the backdrop of pending move to withdraw the tax exemption to them.

The pharma companies in research and development also got some fillip, though no direct concession was offered in particular to them. ``In order to promote outsourcing of research, I propose to allow a weighted deduction of 125 per cent on any payment made to companies engaged in research and development,'' Chidambaram said.

The cut in general CENVAT rate on all goods from 16 per cent to 14 per cent, with a view to manufacturing sector as a whole, would also ensure additional benefits to the pharma sector.

Source: www.pharmabiz.com
29th February 2008

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