The Union Budget for 2007-08 (April/March) has provided wide-ranging tax benefits to research and development companies of the pharmaceutical and biotechnology sectors. These include extension of weighted deduction benefit on R&D expenditure. The companies that could benefit from these concessions include Ranbaxy, Dr. Reddy’s, Biocon, Sun Pharma, Zydus Cadila, Wockhardt etc.

 IMPACT OF UNION BUDGET 2007-08

Budget Impact – Industry

  • Extension of the weighted deduction benefit on the in-house R&D expenditure for another 5 years is likely to boost the R&D activity in the country with major beneficiaries being companies with higher R&D expenditure like Ranbaxy, Dr. Reddy’s, Biocon, Sun Pharma, Zydus Cadila, Wockhardt etc.
  • Increased support to the National AIDS Control Programme and polio immunization Programme is likely to benefit Indian companies like Panacea Biotech, Wockhardt, Cipla, and Ranbaxy and MNCs like Wyeth and GSK who have vaccines and Anti-AIDS drugs in their product portfolios.
  • Exemption of clinical trials for new drug testing from service tax will benefit the contract research organizations operating in India like Vimta Labs, GVK Biosciences etc.
  • Reduction in peak customs duty rate in drug intermediates and APIs is likely to have a marginally positive impact on the pharmaceutical industry.
  • Relaxation of FBT on expenses incurred on free samples distributed by companies to doctors is likely to have a marginally positive impact on the industry.