Association of Biotechnology Led Entrepreneurs (ABLE) has proposed a slew of tax incentives, duty exemptions for imported raw materials, for indigenous life saving drugs and diagnostics. This would go a long way to spur the growth of the biotechnology sector in the country.
The Association has presented its proposals with focus areas along with several inputs from the PricewaterhouseCoopers analysis 2011. These proposals will be submitted to the Union Finance Minister Pranab Mukerjee before the presentation of the Union Budget 2011-12
Tax incentives for exports, R&D weightage deduction, 100 per cent exemption from profits of companies engaged in R&D for a period of 10 consecutive assessment years to MAT and service tax provisions are some of the recommendations made by ABLE.
The Association which has been the voice of the industry has a strategic role in providing affordable healthcare as well as meeting the challenges of food and energy security. Since biotechnology industry is research intensive, many of the recommendations pertain to fiscal policies of the government. Budgetary support from the government is also sought in other areas of the sector.
For export promotion, ABLE anticipates that sunset clause for claiming tax holidays (Section 10B) will be extended by one year to March 31, 2012.
In the current tax incentives, a 200 per cent weighted deduction is available only to manufacturing companies and Contract Research Organisations (CROs) are not included in this scheme. Therefore, there is a need to introduce research tax credits for CROs to promote India as a R&D hub.
The rate of weighted deduction should be increased from 200 per cent to 300 per cent, considering the long gestation period to break-even and R&D incentives globally offered by other countries.
Further weighted deduction should be extended to clinical trials, preparations of dossiers, consulting/legal fees for NCE (New Chemicals Entities) and ANDA (Abbreviated New Drug Applications) filings with the US FDA to achieve cost efficiencies.
There is also a need to provide 100 per cent tax exemption on profits of companies engaged in scientific research and development for a period of 10 consecutive assessment years to be extended to companies obtaining approval till March 2012.
Weighted deduction for R&D should be allowed while computing the MAT liability which is 18 per cent. In addition, ABLE has also insisted on the exemption of service tax on research activities.
Transfer pricing issue relating to the comparison between companies engaged in clinical trial support services with CROs needs to be addressed. According to ABLE, a safe harbour mark-up percentage should be prescribed for contract research and development services.
The 100 per cent tax free status for Biotech and Pharma SEZs, needs to be increased from 5 to 10 years because of inherent regulatory gestation in this sector.
Other recommendations cover the segment of Agri-biotechnology where ABLE has called for a fund allocation of around Rs. 100 crore for the educational reforms.
ABLE has recommended for exemption of excise and custom duty based on standard input/output norms certified by the Department of Biotechnology or alternatively duty paid on components and raw materials used in manufacture of life saving drugs be eligible for refund.
Cancer drugs must be brought under the life saving drugs category the impact of customs duty at 12.5 per cent, excise/CVD at 16.32 per cent, education cess at 2 per cent and additional duty on customs at 4 per cent would result in a 36.74 per cent increase in the price of the drugs. Excise duty exemption on molecular diagnostics for critical infections is also sought.
ABLE recommends that Centre should pro-actively implement the concept of biotechnology finishing schools. Emphasis should be given on hands-on-training.