Expectation From Budget 2010- Health &
Pharmaceutical Industry

February 24, 2010- Budget news on budget expectations by health sector of India

The Finance Minister of India is only two days away from 26th February, 2010 when he will present the Union Budget 2010-11. This is a very important financial document for all the sectors of India as it will determine how the performance of various industries is to be financially and otherwise supported by the Government of India. In the budgets of past years, high allocations had been made to the flagship programmes of the government that includes national health too among others. The health industry that includes natural health sector as well as pharmaceutical industry of India has high budget expectations from the Union Budget 10-11 as it hopes for announcements of credible steps to be taken to improve the quality of public expenditure on health sector. Issues such as health, HIV AIDS, poverty alleviation, sanitation projects, water planning and development projects, should continue to remain high priority items on the budget for improved livelihoods and overall development.

• Currently the health related in-house R&D expenses enjoy 150% weighted deduction that should be extended to expenses on outsourced studies such as clinical trials and specific laboratory studies. Also the weighted deduction should be raised from 150% to 200%.
• On lines of the developed economies, the concept of research tax credits to offset future tax liability should be introduced.
• State excise duty on certain formulations should be brought down from the present 16% to 8% .
• Allocation for the National Rural Health Mission should be increased considerably.
• Excise duties should not be applicable to all essential drugs.
• Tax exemption for export oriented units should be extended and the position of new direct tax code on special economic zones should be made clear.
• Healthcare facilities like medicines and life saving drugs, trained medical personnel and doctors, facilities for diagnosis of important diseases and ailments should be extended to the rural India on a priority basis.
• The health industry has many expectations from Budget 2010 regarding subsidies and tax incentives on various essential products such as life saving drugs, equipments for diagnostic purposes etc.
• Tax exemptions should be given to existing hospitals and health institutions so that more and more hospitals and health institutions in rural areas can be established.
• Keeping in view the long gestation period, the tax holiday provided to hospitals set-up in rural areas should be extended from 5 years to 10 years.
• The regulations such as transfer pricing, customs valuation and drug pricing that are like bitter experiences for the pharmaceutical companies should be rationalized along with early implantation of Advance pricing agreements and safe harbour rules.
• Pharmaceutical companies should be allowed for claim of expenditure on a self certification basis or on specified documents such as CA certificate so that compliance of the law is done in hassle free manner.
• In order to reduce the overall cost of treatment of patients, the list of life saving drugs eligible for customs duty exemptions should be extended and the duty on medical devices should be reduced.
• Value Added Tax (VAT) on medicines should be rationalized across states with specific exemption of life saving drugs and life saving medical equipment.
• Drug manufacturers who are not into exports face the issue of accumulation of Cenvat credit in the books due to the difference in the duty structure of APIs and FDFs. Measures should be taken for this as there are no provisions to recover the accumulated Cenvat credit, which ultimately becomes a cost to such manufacturers.

News Source- The Economic Times and Yahoo India Finance