Association of Biotechnology Led Entrepreneurs (ABLE) is seeking tax incentives for innovation, bio-manufacturing and research services including custom R&D and clinical trials in the Union budget for 2009-10 expected to be presented this month.

ABLE in its pre-budget recommendations has explained the need for a range of tax concessions for indigenous innovators. Some of these demands are: A weighted average tax deduction of 150 per cent on all market development expenditure pertaining to innovator products, excise duty exemption for all products and customs duty exemption on all innovator products manufactured in SEZ for a period of 10 years from the date of marketing approval.

With the growing pressure to cut R&D spends, multinational companies are looking to lower costs to mitigate the risk. This is the area where Indian biotech companies can gain, stated Shrikumar Suryanarayan, director general, Association of Biotechnology Led Entrepreneurs.

The current provision for a 150 per cent weighted tax deduction until March 31, 2011, under section 35 (2AB) for R&D expenditure incurred by DSIR recognized research laboratories, has been a great boon to incremental R&D investment. But this does not cover agri-biotechnology companies, expenditure on outsourced R&D activities, foreign Patent Filing Expenditure, Clinical trial activities carried out outside the approved facilities, label expansion & lifecycle management clinical development for biotech drugs and Investigator Initiated studies.

As it is not feasible for companies to carry out the entire research without outsourcing certain specialist activities including clinical trials would normally need to engage experts including foreign consultants to gain the full benefit of R&D. Therefore it is recommended that these expenses are permitted for 150 per cent Weighted Deduction.

Currently Export Oriented Units (EOUs) enjoy tax benefits only upto March 2009. Various Special Economic Zones (SEZs) have been approved recently providing fiscal incentives much beyond the sunset clause applicable for EOUs. Further, SEZs are exempt from payment of all central taxes upfront. There is a need to bring parity in tax structures, tax benefits for EOUs be extended beyond March 2009 and all fiscal incentives for EOUs be aligned with SEZs including applicability of central taxes.

Under bio-manufacturing, ABLE has called for duty exemption norms for raw materials imported for indigenous manufacture of life saving drugs & diagnostics.

There exists a serious anomaly for imported and indigenous Life Saving Drugs and diagnostics and wherein raw materials and components used by indigenous manufacturers for such products are levied customs duty and excise duty whereas the finished products are allowed to be imported duty free.

Other demands include recognition of anti cancer drugs as life saving drugs, duty exemption on diagnostic kits for infectious diseases.

Since contract research is the next sunrise industry after Information Technology, ABLE has pointed out that there is no rationale in restricting exemption of service tax only to clinical trials and should be extended to all R&D companies approved by DSIR/CSIR/DGCI.

Further it has also called for relaxed export obligation norms for biotech parks which include duty free import of equipment, instruments and consumables and tax holiday under Section 10A/10B of the Income Tax Act. This measure will greatly help Biotech Parks to attract a large number of innovative Biotech companies, stated ABLE.

Additional items for consideration in duty free R&D import list are mass spectrometers including MALDI-TOF, ESI -Ion trap and Triple Quad machines, probes for use in fermentation, analysers for glucose, lactate, air sampling systems, mobile laminar flow cabinets, filter integrity test equipment, surface Plasmon Resonance, Bio safety cabinets and Protein Sequencers.