The pharmaceutical exporters in the country have demanded the Union finance ministry for the inclusion of expenditure incurred towards charges for registration of products in the international markets, land & building of R&D facilities and bio-equivalence (BE)  studies in the weighted deduction under Section 35 (2 AB) of IT Act 1961.

In a pre-budget proposal to the Union finance ministry, the Pharmaceuticals Export Promotion Council of India (Pharmexcil) has said that due to the opening up of our economy, there is a severe competition from foreign multinationals.  Besides, Indian manufacturers have to invest substantial amounts in registration of products overseas. Hence, expenditure eligible for weighted deduction should also include expenditure on product registration in foreign countries and consultants’ fees for patent/product registration overseas.

Section 35(2AB), IT Act 1961 grants a weighted deduction of two times the expenditure on scientific research but does not include any expense on the cost of land and building incurred by a company engaged in the business of biotechnology or any other business of manufacture of production of any article or thing other than article or thing specified in the Eleventh Schedule. Such expenditure is to include expenditure on obtaining approvals from regulatory authorities.

Based on their demand, Pharmexcil has stated that a severe competition from foreign multinationals existed due to the opening up of our economy for which Indian manufacturers would have to invest substantial amounts in registration of products overseas. Thus, exporters demand have been justified by Pharmexcil.

The pharmaceutical exporters have demanded that the expenditure eligible for weighted deduction should also include expenditure on product registration in foreign countries and consultants’ fees for patent/product registration overseas.

In order to carry out modern day research, the pharmaceutical companies need state-of-art facilities and several companies conduct research at the locations exclusively designated for modern day research. The infusion of huge funds are required on the purchase of land and on construction of buildings particularly designed for the same purpose

Therefore, exporters have demanded in equity & fairness that such companies are also granted the weighted deduction on the expenditure incurred on land and building since such expenditure constitutes a significant amount of the total amount spent on the research process.

As the pharmaceutical companies have their own approved R&D facilities and to launch their product in the market, they have to get bio equivalence studies through outside agencies. Since these expenses are an integral part of the R&D activity, the pharma exporters have demanded the inclusion of the weighted deduction incurred outside the R&D facilities.