INSUBCONTINENT EXCLUSIVE:
Currency fluctuations and regulatory restrictions have limited profitability for many pharma firmsPharmaceutical companies in country,
largest provider of generic drugs globally, have faced several challenges in recent times
Where on one hand currency fluctuations have limited profitability for some companies, regulatory restrictions and pending approvals have
impacted others in past one year
In a boost to industry, government has allowed FDI or foreign direct investment up to 100 per cent under automatic route for manufacturing
of medical devices under certain conditions
But are there any other steps needed to boost pharma sector With government set to present its Interim Budget on February 1, all eyes are on
any announcements for pharma sector.Here are some of expectations in healthcare sector listed by industry body Ficci:Tax Exemption on
preventive health check-upsEvery year, roughly 5.8 million persons in country succumb to heart and lung diseases, stroke, cancer and
Non-communicable Diseases (NCDs) like diabetes, heart diseases and respiratory diseases are expected to comprise more than 75 per cent of
country's disease burden by 2025
Preventive health check-ups can help in early diagnosis and timely treatment of NCDs, hence lowering complications, mortality and burden on
secondary and tertiary care facilities
It is recommended that tax exemption on preventive health check-up should be raised from current Rs 5,000 per person to Rs 20,000 under
section 80-D of Income Tax Act 1961.Further, given rising advent of lifestyle diseases in country and need to prevent loss of productivity,
it is imperative that employers get a separate annual deduction of up to Rs 10,000 per employee, towards expenses incurred for sponsoring
health check expenses of their employees.Medical reimbursement exemption limit for salaried employees to be set at Rs 1,00,000 per annum The
annual Medical reimbursement limit set at a sum of Rs 15,000 per annum under Section 17(2) of Income Tax Act which was fixed in April 1999,
has been merged along with conveyance allowance into a composite standard deduction limit of Rs 40,000.Given significant rise in cost
inflation index in general (70 per cent over last 5 years) and medical inflation in particular, medical reimbursement deduction needs to be
re-introduced and annual limit needs to be enhanced to not less than Rs 100,000 per annum.Restoration of weighted deduction under Section
35ADCurrently, a weighted deduction under section 35AD of Act in respect of capital expenditure (other than land/ goodwill/ financial
instrument) is available to a taxpayer engaged in building and operating a hospital with at least hundred beds which has commenced its
operations on or after April 1, 2012
However, with effect from April 1, 2017, deduction under section 35AD of Act is restricted to 100 per cent of expenditure only
A sudden withdrawal from April 01, 2017 has led to a significant negative impact on initiatives that have already commenced on these
fronts.Given urgent need to add bed capacity in sector, 150 per cent weighted deduction scheme should be allowed to continue for healthcare
sector for an additional 10 years at least.Simplification of tax regime in respect of real estate investment trusts (REITs)/business
trustUnder revised scheme announced in last Union Budget, there would be no capital gains tax exposure for sponsor at time of listing of
units or subsequent divestment (if securities transaction tax has been paid)
Further REIT/business trust would not suffer tax on rental income distributed, though individual investors in REIT would be liable to pay
tax on income distribution by REIT
Simplification of tax regime would accelerate growth and ensure scale, speed and skill sets for setting up more hospitals and help attract
It is recommended that there should be no capital gains tax incidence at time of setting up of a REIT/business trust as well for individual
investors on income distribution by REIT/Business Trust.
