Pharma industry has expressed  shock over the total neglect of the sector's various demands in the Union Budget presented last Saturday. Experts point out that rather than creating a conducive environment to boost exports and growth, the budget ignored  even the core issues of the sector.

Industry insiders pointed out that in the backdrop of the prime ministers vision to push for ‘Make in India’ campaign, the industry was expecting a far more sector friendly budget. Goa Pharmaceutical Manufacturer's Association (GPMA) informed that it is surprising how the government failed to recognize even some of the key demands of the industry in spite of repeated representations by various associations to the finance minister prior to the budget.

Suresh Kamath, president GPMA said that one of the major hopes that industry was riding on from this highly anticipated budget was exemption from the levy of minimum alternate tax (MAT) for pharma companies investing in research and development (R&D) activities.

He said that industry has been persistently pushing for the abolition of MAT because under the same they have to pay a tax of 21.35 per cent to the government irrespective to whether they are investing in the R&D or not. It is understood that the normal tax that the pharma industry currently have to pay is 34.6 per cent. However, the companies who invest in R&D gets the benefit of weighted deduction of up to 200 per cent, after which they still have to pay minimum 21.35 percent to the government as MAT.

Kamath pointed out, “Even after investing in R&D, we still have to pay MAT, which is unfair and may restrict any pro R&D initiatives in the country. We need pro-active support and encouragement from the government to keep on investing in the same if we need to have a competitive edge over the others in this segment. It is surprising how the government has ignored our demands even though pharma sector has proven to be a recession proof industry along with being one of the most dependable sectors with huge export potential even during the testing times.”

Another concern that the industry has been raising with the government has been the demand to incentivize non-SEZ zones as well. This is because in the past few years, there has been a disturbing trend of companies increasingly shifting their base to SEZ zones, which is leading to lot of displacements in its wake. “Though we appreciate the governments support in encouraging SEZ zones we want the Centre to provide some incentives to pharma hubs or areas as well to avoid total relocation of business units from one place to the other. This is not only leading to loss of investment for companies who have heavily invested in the non SEZ areas but also leading to loss of job opportunity for scores of people as well,” noted Kamath.

It is understood that the only tax exemption that is somewhat favorable for the industry has been the reduction of corporate tax. Which again, experts pointed out had been for all the major sectors not just for pharma.