Can Budget 2022 prove to be an immunity booster for the lifesciences sector?
Amid a rapidly changing demography and government initiatives, some gaps continue to remain in the ability of the sector to contribute significantly to the GDP of the country.
- Jan 22, 2022,
- Updated Jan 22, 2022 7:11 PM IST
Hon'ble Finance Minister Nirmala Sitharaman in her maiden budget speech emphasised on the well-being and health of the society with the slogan -- 'Mazboot desh ke liye mazboot nagrik', thereby introducing the vision of Ayushman Bharat. Since then, the Government of India has demonstrated a large focus on the well-being of the society with introducing policies around 'Make in India', increased budgetary allocations, promoting universal healthcare, medical tourism and digital health ecosystem, etc., to provide the lifesciences sector the required centre stage.
Having said that, amid a rapidly changing demography and government initiatives, some gaps continue to remain in the ability of the sector to contribute significantly to the GDP of the country. The industry expects Budget 2022 to have a larger focus on the sector for augmenting growth and encouraging further investments.
Key expectations from Budget 2022 for the lifesciences sector:
Enabling ecosystem for innovation and research
Innovation in the sector has a high lead time and is also heavily dependent on capital intensive R&D. In absence of any substantial tax incentive/ tax holiday/ exemption for R&D activities, the government could explore various options to augment innovation in the sector vide Budget 2022 such as:
- Innovation Bonds: One of the attractive and innovative ways could be to notify Innovation Bonds similar to the existing NHAI and REC bonds which enjoy a tax-free status
- R&D Linked Incentive: Introduction of R&D Linked Incentive Policy ('RLI') similar to the PLI scheme to boost innovation
- Weighted deduction: Explore at providing a 200 per cent weighted deduction for companies making investments for development of new drugs
Also Read: Budget 2022: What real estate sector, homebuyers expect from FM Sitharaman
Skilled labour
- Incentivising skilled labour development for the health care sector akin to deduction granted for development projects under erstwhile section 35CCD
- Allocation of funds to introduce medical education programmes to address shortage of skilled healthcare manpower in the country
Customs related reforms
- Roll back of health cess on imported medical devices to lower the burden on end consumer
- Post review of customs duty exemption notifications, there was weeding out of certain exemptions which had outlived its utility. Exemptions on levy of duty for import of pharmaceutical goods / lifesaving drugs should continue and should not be subject to rationalisation
Others
- Policies to boost manufacturing of medical devices in India
- Extend sunset clause for concessional tax regime for manufacturing units
(Rahul Kakkad is Tax Director at Lifesciences practice, EY India. Dipesh Chauhan, Senior Tax Professional, EY also contributed to the article. Views expressed are personal.)
Also Read: Budget 2022: Bank privatisation may get a fresh push
Hon'ble Finance Minister Nirmala Sitharaman in her maiden budget speech emphasised on the well-being and health of the society with the slogan -- 'Mazboot desh ke liye mazboot nagrik', thereby introducing the vision of Ayushman Bharat. Since then, the Government of India has demonstrated a large focus on the well-being of the society with introducing policies around 'Make in India', increased budgetary allocations, promoting universal healthcare, medical tourism and digital health ecosystem, etc., to provide the lifesciences sector the required centre stage.
Having said that, amid a rapidly changing demography and government initiatives, some gaps continue to remain in the ability of the sector to contribute significantly to the GDP of the country. The industry expects Budget 2022 to have a larger focus on the sector for augmenting growth and encouraging further investments.
Key expectations from Budget 2022 for the lifesciences sector:
Enabling ecosystem for innovation and research
Innovation in the sector has a high lead time and is also heavily dependent on capital intensive R&D. In absence of any substantial tax incentive/ tax holiday/ exemption for R&D activities, the government could explore various options to augment innovation in the sector vide Budget 2022 such as:
- Innovation Bonds: One of the attractive and innovative ways could be to notify Innovation Bonds similar to the existing NHAI and REC bonds which enjoy a tax-free status
- R&D Linked Incentive: Introduction of R&D Linked Incentive Policy ('RLI') similar to the PLI scheme to boost innovation
- Weighted deduction: Explore at providing a 200 per cent weighted deduction for companies making investments for development of new drugs
Also Read: Budget 2022: What real estate sector, homebuyers expect from FM Sitharaman
Skilled labour
- Incentivising skilled labour development for the health care sector akin to deduction granted for development projects under erstwhile section 35CCD
- Allocation of funds to introduce medical education programmes to address shortage of skilled healthcare manpower in the country
Customs related reforms
- Roll back of health cess on imported medical devices to lower the burden on end consumer
- Post review of customs duty exemption notifications, there was weeding out of certain exemptions which had outlived its utility. Exemptions on levy of duty for import of pharmaceutical goods / lifesaving drugs should continue and should not be subject to rationalisation
Others
- Policies to boost manufacturing of medical devices in India
- Extend sunset clause for concessional tax regime for manufacturing units
(Rahul Kakkad is Tax Director at Lifesciences practice, EY India. Dipesh Chauhan, Senior Tax Professional, EY also contributed to the article. Views expressed are personal.)
Also Read: Budget 2022: Bank privatisation may get a fresh push