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FICCI seeks tax sops for biotech cos
December, 25th 2006
To effect a five-fold increase in revenue generation


The chamber has recommended that tax benefit should also be extended to expenditure incurred on clinical trials for all companies.

With a view to promoting innovation in biotechnology and effect a five-fold increase in revenue generation to $5 billion, the Federation of Indian Chambers of Commerce and Industry (FICCI) has proposed seven-point package to the Government.

The chamber has sought some tax benefits for biotech firms. Expenditure incurred on clinical trials by companies is currently not accepted as an expense to be included for weighted tax deduction at 150 per cent.

The chamber has recommended that tax benefit should also be extended to expenditure incurred on clinical trials for all companies. Since expenditure incurred on scientific research is allowed there is no reason why it cannot be extended to clinical trials also, the chamber has argued.

Second, the Government may consider providing relief to recognised biotech, pharmaceutical and clinical research companies by giving a blanket permission of around Rs 1 crore per annum for import of laboratory consumables. These can be certified as non-hazardous, if required, the chamber has recommended.

Third, at present there is a lack of technical expertise at the airports and ports to handle the biological materials. Customs officials may be updated regularly with the new policies on issues related to handling of biological materials.

Promoting Investment

Fourth, the purpose of exemption of basic duty on equipment for research is to promote investment in basic research but the same is being nullified by subjecting it to additional duty of 16 per cent. Hence, the anomaly should be corrected.

The chamber has noted that there is exemption against the additional customs duty applicable to public funded research organisations or non profit research organisations where they have to pay only 5 per cent custom duty on equipment for research.

The chamber has demanded similar duty benefit for Government funded organisations and private sector for research activities.

Fifth, on the lines of excise duty exemption, customs duty should also be nil for equipment, the chamber has demanded. Sixth, service tax was imposed on clinical trials for testing of drugs and formulations this year at the rate of 12.24 per cent (including education cess) under the category `technical testing and analysis services'. Thus, it may be seen that service tax would be an additional high impact cost to the nascent Indian clinical trial industry. It is therefore suggested that CRO industry be exempted from the levy of service tax on all its activities including clinical trials to encourage it.

Seventh, as for biofuel and ethanol production, the Government may consider extending tax incentives such as excise and import duty exemption to promote use of bio-diesel and ethanol in auto fuels, the chamber suggested.

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