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Exporters disappointed as Budget 2025 fails to address Section 43B(h) waiver demand

Shardul Nautiyal, Mumbai
Wednesday, February 5, 2025, 08:00 Hrs  [IST]

India's pharmaceutical exporters have expressed disappointment as the Union Budget 2025, presented by Union finance minister Nirmala Sitharaman, failed to address their long-standing demand for relief under Section 43B(h) of the Income Tax Act. Despite repeated appeals by the industry, including requests by the Federation of Pharmaceutical and Allied Products Merchant Exporters (FPME), the government has remained silent on this critical issue.

Section 43B(h) mandates that payments for goods or services be cleared within 45 days under the MSME payment regulations. Non-compliance results in the disallowance of tax deductions, creating financial strain on exporters. Pharma exporters argue that these restrictions are impractical for international trade, where credit periods of up to 120 days are standard.

“The industry had high hopes from Budget 2025, but the lack of any mention of relief under Section 43B(h) is a major setback,” said a spokesperson for FPME.

“We are competing with global players from China, Bangladesh, and Pakistan, who offer extended credit periods. Without similar flexibility, Indian exporters will struggle to maintain market share in the USD 1.5 trillion global pharmaceutical market,” he further explained.

The pharmaceutical export sector plays a vital role in India’s economy, contributing significantly to foreign exchange earnings. MSMEs, which make up 60% of the pharmaceutical manufacturing industry, are particularly vulnerable to these restrictive tax provisions. With a turnover of Rs. 60,000 crore (USD 9 billion) and accounting for 70% of India’s pharmaceutical production by volume, MSMEs are crucial to maintaining India’s position as the "Pharmacy of the World."

Industry leaders fear that the continued lack of action on this issue could hamper growth and competitiveness. “We had directly appealed to the finance minister during Budget discussions, yet no concrete action has been taken. The delay is not just a regulatory hurdle but a direct threat to our export viability,” FMPE stated.

The FPME has reiterated its demand for a waiver or at least an extension of the credit period to 60 days, aligning with international trade practices. Without this, exporters warn that India risks losing its standing in the global pharmaceutical market.

As the industry processes the implications of the Union Budget 2025, all eyes are now on the government’s next move. Pharma exporters are calling for urgent policy intervention to safeguard India’s pharmaceutical export growth and competitiveness on the world stage.

 

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