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Govt needs to widen weighted tax rate from 200 to 250% to drive innovation: Ajay Shah

Nandita Vijay, Bengaluru
Wednesday, January 24, 2018, 08:00 Hrs  [IST]

In order to boost innovation, the Union government need to increase the weighted tax deduction on R&D from 200% to 250%. The government had deducted the expenditures on R&D from 200% to 150% and eventually phasing out. This has not created any positive outcome amongst the Indian pharmaceutical industries, stated Ajay Shah, vice president, Recruitment, TeamLease Services.

To boost innovation, the industry preferred an incremental change in weighted tax deduction on R&D from 200% to 250% and expand the scope of the benefit to include R&D expenses incurred outside the facility like CRO, clinical studies, patent and product registrations. This would encourage more venture capital and private equity firms to come forward and make investments creating more opportunities for manpower hiring. For the Budget 2018, it is important for the government to consider this, he added.

India is home for increased focus on shared service setups which created jobs within pharma manufacturing and FMCG in large numbers. Now the government needs to ensure higher education is more rooted to bridge the widening skill gap. Although last year, saw a reduction in attrition, yet retention of talented researchers and sales professionals is a challenge. Technical skills in cloud & data science platforms have produced new collar jobs that demand deeper knowledge with sharper skill sets, Shah told Pharmabiz in an email.

The pharma industry needs to have better policies to retain and nurture the existing talent, as well as equip them with necessary skills. There is a need to maximize hiring with a demand of freshers and experienced candidates with skilled domain expertise. Therefore the government in this Budget allocation should support skill-based learning, he noted.

Further in the Budget 2018, the government must expand the Coverage of Safe Harbour Rules to pharmaceutical industries to have better transfer pricing and bring down litigation in respect of international transactions is another point of discussion that can be an inclusion in the new budget, said Shah.

India pharma has been witnessing a high traction. This is driven by increased focus on health-wellness, government- supported healthcare initiatives and the knowledgeable consumers. The robust sales and simpler forms of medications accessible at competitive prices, pharma companies have adopted, digital sales approach and online platforms. All these will spike hiring & investments in people management for the pharma sector. The government cannot ignore the pharma sector and therefore adequate assistance is expected during Budget 2018.

The current norms on price control and generic drug prescription is a bang bang on the quality drugs versus suspect quality drugs. Therefore the government will need to promote and create larger routes for research, innovation, stated Shah.


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