Budget 2021: Expectations of life sciences and pharma sectors

In the upcoming Union Budget, these need to be further augmented:

Incentivize research and development

It is long overdue, and India should participate in the innovation area at a global level. Along with a scheme similar to the PLI, the government should consider tax incentives to attract innovation, and 200% tax deduction can be brought back by the government.

Attract global investment

Taking a cue from the electronics sector where the government has not only attracted global players, but also provided an ecosystem to augur growth, the pharmaceuticals sector needs to be supported with a similar ecosystem. Interaction with industry and global players would do well to make India move from a generic manufacturer to an innovator developer and manufacturer for the world.

Enabling digital transformation

Technology/digital transformation is another key area of focus. In fact, it would be the building block for the much-expected universal healthcare in the country.

Stable pricing policies and tax certainty

The government may also look at solving issues such as introducing stable pricing and policy environment favorable for long-term investment decisions, coupled with lower margins due to government pricing policies, reducing dependency on imports, increased public and R&D spending, etc. Another area that would help the sector is having some tax certainty. The government could consider regularizing PE risk on account of mobility restriction under various scenarios. From an indirect tax perspective, the government could make healthcare affordable by ‘zero-rating’ healthcare services to further incentivize healthcare services, as also lower the GST rates.

Tax deduction on CSR expenses

To promote donations, corporate social responsibility expenses could be considered as a deduction from taxable income.

The sector has played a pivotal role in the unprecedented Covid-19 pandemic crisis. Pharmaceuticals and life science could be the center of focus in Budget 2021, as an immunity booster or an antibody for the economy, and to gear-up and be self-reliant for such unprecedented times in the future—truly making India atmanirbhar in the health domain.

(This article is authored by Hitesh Sharma, EY India Partner & National Tax Leader, Life Science Sector and first appeared in The Financial Express on 27 January 2021.)