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`Extend R&D tax benefits to pharma cos'
December, 21st 2006

The Associated Chambers of Commerce and Industry of India (Assocham) has called on the Government to extend the tax benefits available for R&D to pharmaceutical companies by 10 years. The provisions of Section 35 (2AB) of the I-T Act are to expire on March 31, 2007.

Assocham says that without tax exemption, the domestic pharmaceutical industry would have to incur huge expenditure, and that an extension till 2017 would help the industry in long-term planning and research to face competition.

The chamber has written to the Ministries of Chemicals and Fertilisers and Finance for the same, pointing out that while the R&D spend by major Indian companies is only about 5 per cent of their turnover, globally large pharma companies spend 15 per cent on R&D.

R&D spend

According to Assocham, R&D spend has grown at CAGR of 38 per cent between 2001-2006. Additionally, the chamber has also asked for exemption for services provided and availed in R&D, import of capital goods for R&D and expenditure on clinical trials, under the above Act.

It has also urged the Government to exempt import duty on clinical trial samples and authorise the Drug Controller General of India to decide who qualifies. The industry body would also like clinical trials conducted by Indian companies outside the country to enjoy the same tax benefits that they do when they conduct them within the country.

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