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Industry sources say that, “On the taxation front, the main suggestion is for tax relief under Section 115BAB of the IT Act, specifically for companies solely engaged in pharmaceutical R&D.”
Section 115BAB offers a lower 15% corporate tax rate to newly registered manufacturing companies established on or after October 1, 2019.
The sector wants R&D companies to be included in the list of companies eligible for this benefit of lower taxation, arguing that this will encourage investment in R&D, sources said.
An allied request is that these companies be allowed to claim a deduction of up to 200% of the expenditure incurred on pharmaceutical research and development.
Incidentally, the sector has also asked the government to consider setting mandatory timelines for the disposal of appeals by IT appellate authorities and reducing the incidence of tax demands by removing the turnover criteria that makes these companies eligible for safe harbour provisions. This move, they say, would benefit even smaller R&D companies – especially startups, industry sources added.
Commenting on this, Anil Matai, Director General, OPPI, said, “The expansion of the scope of Section 115BAB of the Income Tax Act, 1961, to companies solely engaged in pharmaceutical R&D and providing a 200% deduction rate on R&D expenditures will encourage innovation in the pharma space.
He added that mandatory timelines for disposing of appeals, particularly by the Income Tax Appellate Authorities, and removing turnover criteria for safe harbour provisions for R&D will also encourage innovation and investment. These recommendations are essential to build a robust, equitable, and patient-focused healthcare framework for India’s future.
The other set of requests relates to strengthening the country’s healthcare infrastructure – from higher public spending on health initiatives and enhancing primary healthcare infrastructure to expanding the people covered under the Ayushman Bharat scheme. They are also said to have asked for steps to upgrade existing centres of excellence and establish new ones, sources said.
“To strengthen India’s healthcare ecosystem and drive inclusive growth, the upcoming Budget must prioritise increased public spending on health initiatives. This includes expanding coverage under the Ayushman Bharat scheme to the missing middle, upgrading existing Centres of Excellence, establishing new ones, and enhancing primary healthcare infrastructure,” Matai added.
In addition, the sector has pushed to make more life-saving and cancer drugs and treatments more affordable by expanding the list of drugs that are afforded import duty exemptions.
The government has previously provided both import duty and GST exemptions on several such drugs.
Apart from this, there are some procedural requests to enhance ease of doing business for the sector – such as simplifying the Advance Pricing Agreement (APA) procedures, narrowing the timelines for swifter resolution by APA authorities, and streamlining steps to aid in the timely renewal of APAs, sources added, which are under active consideration by the government.
It is understood that Finance Ministry officials have taken note of these suggestions, and these will be taken up for further deliberations, which are already underway.
However, a final decision on which of these will be acted upon in Budget 2025 will rest with the Finance Minister and her Budget team.
