Indian pharmaceutical industry has been witnessing significant growth over past few years under the existing income tax return policies. By 2020, India’s pharmaceuticals market is expected to reach US$45 billion and become the sixth largest pharmaceutical market in the world.The Indian Government, in efforts to boost R&D in the pharmaceutical sector, has established six National Institutes of Pharmaceutical Education and Research (NIPER) in 2002.The Government of India has declared NIPER as an ‘Institute of National Importance’.
Finance Minister, Mr. Arun Jaitley presented the Union Budget for the income tax return in Parliament on 29 February 2016. Although, there were no explicit announcements made for the pharma sector, below are a few tax proposals that could have an impact on the pharma sector-
•A flat corporate income tax return rate of 25% has been defined for Indian manufacturing companies formed on or after 1stMarch 2016. This motion will provide a boost to drug manufacturers who may want to set up new manufacturing facilities.
•Benefit of section 10AA (pertinent to units located in Special Economic Zones) is proposed to be made available to units, commencing manufacture or production of articles or things, or providing services before 1 April 2020. This move shall profit pharma companies that are setting up new manufacturing facilities in Special Economic Zones.
•Currently, the Central government provides a weighted income tax refund deduction of 200% for any capital and revenue expenditure incurred in account of in-house R&D by a company, eliminating expenditure on land and buildings. Such weighted tax deduction is proposed to be reduced from the present 200% to 150% from April 2017 to March 2020 and thereafter from April 2020 to 100%. This reduction led to a massive setback as the industry was expecting a 300% weighted average reduction. This reduction will have a negative impact for all pharma companies as it will result in an increase in income tax return rate.
•A special patent regime has been proposed wherein global income by way of royalty from worldwide exploitation of patents developed and registered in India will be taxed at the rate of 10% on a gross basis plus surcharge/cess. The income will not be subject to Minimum Alternate Tax. This proposal will provide a significant boost to local innovation and manufacturing since the general income tax return rate is around 35%. Consequently, pharma companies which have patents registered in India would be able to commercialize patents on a global basis.
The Pharma companies can make use of 'Refund Banker Scheme,' which commenced from 24th Jan 2007, is now operational for income tax returns filed all over India (except at Large Taxpayer Units) and for returns processed at CPC (Centralized Processing Centre) of the Income Tax Department at Bangalore.The Indian pharma industry is at an inflexion point. Changes in patent laws have propelled Indian pharma to the centre stage of global attention with respect to outsourcing of contract research, manufacturing, pre-clinical and clinical trials. Simultaneously, large Indian generic companies are acquiring a global footprint and aspire to be innovator companies.
Tax payers can view status of income tax refund, 10 days after their refund has been sent by the Assessing Officer to the Refund Banker. Status of 'paid' refund, being paid other than through 'Refund Banker,' can also be viewed at www.tin-nsdl.com.
'Refund paid' status is also being reflected in the 'Tax Credit Statements' in Form 26AS.
There are certain income tax return proposals which may negatively impact the pharma sector, overall, the budget proposals have been received positively in this sector and will provide a boost to the industry.
Source : https://www.evernote.com/shard/s324/sh/31569b6c-c6c5-48cd-85b9-3ff6e958b3aa/3a3bcd4f93cae3c396e48f18c4288864
Also Read : Fiscal Deficit – The Boulevard To Essential Indian Economy
Finance Minister, Mr. Arun Jaitley presented the Union Budget for the income tax return in Parliament on 29 February 2016. Although, there were no explicit announcements made for the pharma sector, below are a few tax proposals that could have an impact on the pharma sector-
•A flat corporate income tax return rate of 25% has been defined for Indian manufacturing companies formed on or after 1stMarch 2016. This motion will provide a boost to drug manufacturers who may want to set up new manufacturing facilities.
•Benefit of section 10AA (pertinent to units located in Special Economic Zones) is proposed to be made available to units, commencing manufacture or production of articles or things, or providing services before 1 April 2020. This move shall profit pharma companies that are setting up new manufacturing facilities in Special Economic Zones.
•Currently, the Central government provides a weighted income tax refund deduction of 200% for any capital and revenue expenditure incurred in account of in-house R&D by a company, eliminating expenditure on land and buildings. Such weighted tax deduction is proposed to be reduced from the present 200% to 150% from April 2017 to March 2020 and thereafter from April 2020 to 100%. This reduction led to a massive setback as the industry was expecting a 300% weighted average reduction. This reduction will have a negative impact for all pharma companies as it will result in an increase in income tax return rate.
•A special patent regime has been proposed wherein global income by way of royalty from worldwide exploitation of patents developed and registered in India will be taxed at the rate of 10% on a gross basis plus surcharge/cess. The income will not be subject to Minimum Alternate Tax. This proposal will provide a significant boost to local innovation and manufacturing since the general income tax return rate is around 35%. Consequently, pharma companies which have patents registered in India would be able to commercialize patents on a global basis.
The Pharma companies can make use of 'Refund Banker Scheme,' which commenced from 24th Jan 2007, is now operational for income tax returns filed all over India (except at Large Taxpayer Units) and for returns processed at CPC (Centralized Processing Centre) of the Income Tax Department at Bangalore.The Indian pharma industry is at an inflexion point. Changes in patent laws have propelled Indian pharma to the centre stage of global attention with respect to outsourcing of contract research, manufacturing, pre-clinical and clinical trials. Simultaneously, large Indian generic companies are acquiring a global footprint and aspire to be innovator companies.
Tax payers can view status of income tax refund, 10 days after their refund has been sent by the Assessing Officer to the Refund Banker. Status of 'paid' refund, being paid other than through 'Refund Banker,' can also be viewed at www.tin-nsdl.com.
'Refund paid' status is also being reflected in the 'Tax Credit Statements' in Form 26AS.
There are certain income tax return proposals which may negatively impact the pharma sector, overall, the budget proposals have been received positively in this sector and will provide a boost to the industry.
Source : https://www.evernote.com/shard/s324/sh/31569b6c-c6c5-48cd-85b9-3ff6e958b3aa/3a3bcd4f93cae3c396e48f18c4288864
Also Read : Fiscal Deficit – The Boulevard To Essential Indian Economy
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