Association of Biotechnology Led Entrepreneurs (ABLE) is looking for duty exemptions and tax concessions that will bolster the growth of the Indian biotech sector. The projected growth areas identified for fiscal 2010 are Innovation, Bio-manufacturing, Special Economic Zones (SEZs) and Research Services including Custom R&D & clinical trials.
In its recommendations for the Union Budget 2010-2011 slated for this month end, ABLE has requested for tax concessions /holidays for indigenous innovators. It has also insisted on duty exemption norms for imported raw materials imported for indigenous manufacture of life saving drugs & diagnostics. Since contract research is expected to be next sunrise industry for the country after information technology, the Association has also pressed upon the need to address issues related to service tax this sector.
With regard to tax holidays for innovators, ABLE informed that several Indian Biotech companies have embarked on a risky and challenging path of innovation entailing long years and high levels of investment in R&D. The Union government has to offer Innovator companies a weighted average tax deduction of 150 per cent on all market development expenditure pertaining to innovator products including label expansion and life cycle management based clinical development, foreign registration expenses, profile building at scientific meetings and International conferences, Investigator Initiated Studies, Continual Medical Education. Such expenses may be booked under section 35 (2AB). In addition there is also a need for excise duty exemption on all such products for a 10 year period and an Income-tax holiday and exemption of capital gains for a period of five years.
There is a need to look at the Weighted average tax deduction on R&D expenditure & inclusion of International patent filing costs and market development costs under Section 35 (2AB) for the bio-agri sector. The current provision for a 150 per cent weighted tax deduction until March 31, 2011 for R&D expenditure is only for DSIR recognized research labs has been a boon to incremental R&D investment. However this did not cover the bio agri companies.
Further, ABLE has insisted on expenditure on outsourced R&D, foreign patent filing expenditure and international consultancy expenditure among others. Exemption of withholding tax for technology transfer and Technology licensing in biotechnology and RD consumables are also on the request card.
Referring to the bio-manufacturing & SEZs, ABLE stated that there exists a serious anomaly with regard to imported and indigenous Life Saving Drugs and diagnostics. The raw materials and components are levied customs and excise duties but the finished products are allowed to be imported duty free. This is detrimental to indigenous manufacturing and instead encourages trading. Furthermore, it puts indigenous manufacturers at a disadvantage.
Coming to the SEZs which have been approved recently to offer fiscal incentives much beyond the sunset clause applicable for Export Oriented Units (EOUs), ABLE recommends to bring parity in tax structures, tax benefits to the latter be extended beyond March 2012 and all fiscal incentives like central taxes be applicable too.
In order to maximize opportunities in the contract research space, ABLE wants the government to address the Service Tax issue. Presently government has restricted the service tax exemption to clinical trials. ABLE has asked for exemption to be extended to all the R&D companies approved by DSIR/CSIR/DGCI and involved in offering services for conducting testing and analysis towards pre-clinical and clinical testing for drug discovery and development, including drugs, formulations and new chemical entities.