Pharma cos may get tax refund for donated drugs

Posted AtEconomic Times

Drug makers’ charity could be exempt from tax soon. As part of its Budget recommendations, the chemicals ministry has recommended to the finance ministry to refund the customs and excise duty on all medicines donated by pharmaceutical companies in times of a national emergency. This would be with prospective effect.

If accepted by the finance ministry, the pharma companies would get refund of 16% excise duty and 15% peak customs duty levied on medicines. Though the recommendation says that state level value-added tax should also be refunded, it would not apply in case of bulk donation to an agency.

Earlier this year, drug makers, who are members of two leading domestic associations — Indian Drug Manufacturers’ Association (IDMA) and Indian Pharmaceuticals Alliance (IPA), had donated Rs 25-lakh drugs each to Pakistan after the earth quake in Muzaffarabad. The ministry is also in the process of calling all cancer drug makers in the country to lower prices to design an access programme. Now, the ministry is on a moral high ground to ask the companies to lower prices, after recommending to the finance ministry that excise duty on all medicines should be reduced by half from the present 16%. In the case of cancer drugs it would make a big difference as some of them cost more than Rs 1 lakh for a dose.

The plan is to design a scheme with the government subsidising cancer drugs to the extent of half of its prices and companies too lowering prices which will be given through cancer hospitals that are a part of the scheme.

If accepted, the excise duty cut will also ease the pain of small-scale drug makers who suffer due to duty levy on maximum retail price against the earlier practice of levying it on ex-factory price. The ministry has also recommended raising the excise exemption limit on small-scale players from Rs 1 crore to Rs 5 crore.

Besides, it has suggested that the weighted deduction of 150% of research expenses allowed while calculating the taxable income should be extended to 2015 from present 2007 in addition to raising it to 200%. The Prime Minister’s task force had recommended that it should be extended by ten years.

December 08, 2005