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Budget 2012: Pharma disappointed, healthcare hopeful

E Kumar Sharma     March 16, 2012
Those in the industry looking for positives in the Budget there seems hope in fiscal consolidation appearing as a key concern for the finance minister. They see this getting reflected in the increases in taxes and duties, relatively more stable and less aggressive targets set up for tax collections, disinvestment, and plan expenditure.

However despite the finance minister talking about health and its importance, there seems to be nothing in particular to boost the pharmaceutical industry. "The allocation to healthcare was not increased. What was missing was clarity around provisions that relate to weighted tax deduction on account of R&D and whether the existing deduction is availed in full due to existing MAT provisions. The current irrational structure as far as excise duty on APIs and formulations is concerned, also continues to remain,'' says Umang Vohra, CFO, Dr Reddy's.

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As for healthcare, there seems hope. Sangita Reddy, executive director, operations at the Apollo group of hospitals, says, "A specific mention that hospitals would be covered under the negative list under the service tax net is surely a positive move.'' A careful look at some of the provisions suggests it is quite positive with some futuristic moves for the sector. Specifically, she refers to tax exemption of Rs. 5000 for preventive health checks as feels it could encourage early detection of diseases.

Other points, the sector could be upbeat about being: Increase in the quantum of deduction available under 35AD of the Income Tax Act in respect of capital expenditure incurred on construction of new hospitals consisting of at least 100 new hospital beds from the existing 100 per cent to 150 per cent. Also, positive, she feels is the increase in the quantum of deduction available under Section 80D of the Income Tax Act in respect of medical insurance premium paid by senior citizens from the existing Rs 15,000 to Rs 20,000. The finance minister however, some argue, fell short of granting the long pending demand of granting the infrastructure status to the sector.


More generally, for the industry in general, lack of indications on time lines regarding GST or the DTC are seen as a negative.


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