Budget 2010 Snapshot
Specific proposals for the Pharmaceutical sector
Industry Overview
• Industry size approximately USD 11 bn. Ranked 4th in
volume and 14th in value, in the world.
• Estimated to grow to approximately USD 30 bn by
2015, with a CAGR of around 12%.
• Low-cost manufacturing, high-quality research and
manufacturing facilities and educated personnel provide
a global competitive advantage to the industry.
• India is an upcoming destination for clinical trials with a
huge patient pool, easy recruitment of patients and high
cost savings.
Key Developments
• Proposal to introduce the ‘Clinical Establishments
(Registration and Regulation) Bill’.
• Proposal to introduce the “National Biotechnology
Regulatory Authority Bill”.
• New Group of Ministers formed to decide the National
Pharmaceutical Policy.
• US Food and Drug Administration office opened in New
Delhi, expected to start another in Mumbai.
• New set of guidelines issued by the Drug Controller
General of India to streamline the application process for
conducting bioequivalence studies for export purposes.
• Special zones for pharma products planned at
international cargo terminals.
Budget Wish list • Transfer pricing, customs and DPCO regulations to be
harmonised to prevent hardship arising from conflicting
Direct Tax objectives of these regulations, especially in the context
of active pharmaceuticals ingredients (‘APIs’)/ finished
• Tax deduction to be provided to units engaged in drug formulations imported from related parties.
contract research and development (‘R&D’).
• The transfer pricing issue relating to the comparison of
• Incidental expenditure carried outside R&D facility in prices of original researched/ innovator APIs with
India or in any foreign country, to be considered for generic APIs without considering quality and efficacy, to
weighted deduction. be addressed.
• Deduction available for in-house R&D to be increased
from 150% to 300%, and to be extended for another
10 years.
• Tax holiday provided to hospitals set-up in rural areas to
be extended from 5 to 10 years; tax holiday also to be
granted to hospitals set-up outside rural areas.
• Further extension beyond FY11 of the sunset clause
under section 10B, to benefit export-oriented units.
• The increasingly heavy investment on environment,
health and safety norms, building rural healthcare/
supply chain infrastructure to be subsidised/ tax
incentivised.
• Expenditure incurred on physician's samples or for
educating physicians (through seminars etc) to be
allowed as a deduction on a CA certification basis.
• MAT to be reduced from 15% to 10%.
• TDS provisions not to apply to goods purchased under
contract manufacturing arrangements.
PwC
Budget Wish list Direct Tax - Other Key Proposals
• Income tax slabs for individuals revised favorably
Indirect Tax
• MAT rate increased from 15% to 18%
Customs duty • Surcharge on domestic companies reduced from 10%
to 7.5%
• The list of life saving drugs eligible for customs duty
exemptions to be expanded. • No capital gain tax on conversion of private or unlisted
companies to LLP subject to certain conditions
• Customs duty on medical devices to be reduced. • No disallowance of expenditure, if tax withheld is Contacts
• Custom duty on formulations to be brought down in line with deposited anytime before the due date of filing return of
Chelliah Committee's recommendation. income
• Royalty or FTS liable to tax in India in the hands of non- Sanjay Tolia
• Customs and related duties for import of all capital goods,
resident irrespective of situs of rendering services Executive Director
raw materials, consumables and reference standards for
sanjay.tolia@in.pwc.com
R&D purposes, to be fully exempted.
Indirect Tax - Sector Specific Proposals 91 22 6689 1322
Cenvat
Bipin Pawar
Customs duty
• All excisable goods used for R&D purposes to be exempted Executive Director
• Uniform, concessional basic duty of 5%, CVD of 4% with full
from excise duty. bipin.pawar@in.pwc.com
exemption from special additional duty prescribed on all
91 22 6689 1320
• Bulk drugs and formulations thereof falling under the medical equipments. A concessional basic duty of 5% is
categories of Anti-AIDS, Anti-Cancer, Anti-TB, immune being prescribed on parts and accessories for the S Madhavan
suppressants and other life-saving drugs to be exempted manufacture of such equipment while they would be exempt Executive Director
from excise duty. from CVD and special additional duty. s.madhavan@in.pwc.com
• Import of specific inputs for manufacture of orthopedic 91 22 6689 1266
• Abatement limit allowed for computation of excise duty on implants exempted from customs duty.
medicaments, to be increased from 35% to 45% percent. Sharat Bansal
• Excise duty on APIs covered under Chapter 29 of Central Cenvat Sector Leader
Excise Tariff to be brought on par with the duty on • Reduction in excise duty on goods covered under Medicinal sharat.bansal@in.pwc.com
Formulations covered under Chapter 30 of the Tariff. and Toilet Preparations Act from 16% to 10%. 91 22 6669 1538

• Physician's samples to be exempted from excise duty. Service tax

• Service tax introduced on medical health check up
undertaken by corporates and health insurance companies.
Budget – Proposed Amendments
Direct Tax - Sector Specific Proposals Indirect Tax - Other Key Proposals

• Weighted deduction available for in-house R&D to be
increased from 150% to 200%.
• Weighted deduction for sums paid to approved scientific
research association / similar bodies increased from 125%
to 175%.
• GST expected to be introduced by April 1, 2011
• Rate of excise duty on all goods increased from 8 % to 10 %
• No change in the general customs duty and service tax rates
• Service tax on certain new services proposed and scope of
certain existing services enlarged

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