In a move to ensure better representation of the issues raised by the industry in the much anticipated budget, Indian Drug Manufacturers’ Association (IDMA) recently met with top officials from the central board of excise and customs of finance ministry, with their pre-budget expectations. It is understood that the meeting that took place in Delhi, focused on addressing key challenges faced by the industry and sough urgent intervention from the government.

In a detailed discussion with officials from the ministry of finance, the trade body highlighted some of the main concerns affecting the industry relating to direct taxes like that of Section 10B in the representation. IDMA pointed out that the third proviso to section 10B(1) restricts the deduction under this section upto assessment year 2012-13. By denying the deduction from the assessment year 2013-14, companies who have invested substantial amounts in Export Oriented Units (EOUs) with the belief that deductions will be available for 10 consecutive years will be adversely hit.

They urged the government to give relief to EOUs which they legitimately deserve, by deleting the said proviso and suggested that the provisions of section 10B should be continued without any time limit. Further, they also raised the issues relating to Section 35: 2.1, 2.2, 2.3, which deals with weighted deduction of 200 per cent of R&D expenses in an in-house facility and Section 40 (a).

In the growing light of confusion in interpreting the notification, IDMA has also sought clarification to circular on dis allowance of freebies to doctors. As Daara B Patel, secretary-general, IDMA pointed out the circular meant to disallow freebies such as gifts, travel facility, hospitality, cash distributed to doctors, are being loosely interpreted by tax department to disallow cost on distribution of physician samples to doctors, as well.

“Physician samples do not add any value or benefit in the hands of doctors and hence it cannot be equated with gifts, facility, and cash. It must be understood that the samples are meant for experimenting medicines with the patients, thus amendment is needed from retrospective effect so as to exclude physician samples from the purview of the said circular,” Patel informed.

On the indirect taxes, IDMA stressed that since the SSI sector contributes significantly to the national economy, the eligibility limit under SSI exemption scheme should be increased to Rs.500 lakh from the present limit of Rs.400 lakh, whereas the exemption limit under SSI exemption scheme should be increased to Rs.200 lakh from the present limit Rs.150 lakh.

On valuation of pharma finished goods removed from factory without printing and any requirement of MRP, IDMA suggested that there is a need to bring in better clarity in the Act on certain key fronts as lack of clarity is leading to confused interpretation between Section 4 & Section 4A, instigating unwarranted litigations as well higher cost of sale. The sale of pharma finished goods are governed by Section 4A, which calculates the assessable value of goods and duty based on the MRP and abatement scheme of taxing.

While deliberating over these issues, the industry also highlighted views on the proposed GST regime, the issue of service tax levied on payments meant for purpose of exports (Section 66 B import of service) on refunds of CENVAT credit, etc.