The Pharmaceutical Exports Promotion Council (Pharmexcil) has urged prime minister Dr Manmohan Singh to extend the income tax benefits offered for the pharma Special Economic Zones (SEZs) under section 10 B, the sunset clause, under the Income Tax Act to four more years till the year 2015 for the existing units, in an effort to support the pharmaceutical exporters in the country.
The sunset clause for pharmaceuticals will come to an end from the beginning of April, 2011. Meanwhile, many Export Oriented Units (EOUs), and those units which are migrating to the SEZs to receive the benefit of the clause are still in the midst of setting up infrastructure and attaining regulatory approvals from the drug regulators in various countries. If the present sunset period is not extended, many of these companies may not be able to exploit the benefits at all.
The companies need about three years, just to get the site approval alone from the various drug registration authorities and in case of EOUs migrating to SEZs an additional period of almost 18 months before filing for approval to set up new infrastructure. Taking into consideration all these factors, the council has requested the prime minister to extend the sunset clause till March 31, 2015 for the existing units.
In a letter to the Prime Minister, the council requested that, “...the Sunset Clause should be extended to 31st March 2015 for existing units so that their transition from EOUs to SEZs is smooth, not only to protect their existing exports but also to keep the growth momentum in tact. As a parallel action, the operating period under Sub Section 1 of Section 10 B should also be extended upto 31st March 2015 for availing Income Tax Benefits”.
The export undertakings have made huge investments in setting up plant and machinery in 100 per cent EOUs and it is in the interest of the country to continue and increase exports from these units, added the letter.
Further, the council expressed its hope that the units in the SEZs will continue to get all the income tax benefits as envisaged even after the Direct Tax Code comes into existence from April, 2011. In case of any ambiguity on decision regarding this, the government should issue necessary clarifications at the earliest to enable exporters to plan their future investments, so as to increase their exports substantially in the years' ahead, requested the council.
Earlier, the council has raised its concerns on the issue as there is an ambiguity on whether the pharma SEZs may get the income tax exemption once the direct tax code, which does not support area based exemptions, is implemented.
The industry organisations and major consultant firms like PriceWaterhouseCoopers (PWC) have requested the central government to further extend the sunset clause beyond FY11, to benefit export-oriented units, in the Union Budget 2011.