With a view to encourage biotech exports, the industry has sought reintroduction of Software Technology Parks of India (STPI) scheme.
The Association of Biotech Led Enterprises (ABLE), a biotech focused industry body, in its representation to the Union Department of Biotechnology has pleaded that considering the current economic scenario, tax incentives on exports made through STPIs should be restored in the upcoming Budget.
Such incentives were available under Section 10B till March 2011. The scheme was withdrawn in the Assessment Year 2012-13.
Supporting the industry's cause, Mr Rakesh Mishra, Executive Director -Tax & Regulatory Services, PwC India, said “Biotech is a growth sector with significant potential. It is important that export incentives under the STPI scheme are revived for this sector to realise its full potential.”
“Research and development in the biotech and pharma sector is highly capital intensive. Export tax benefits will help the major industry players in de-risking and funding their original research,” he added.
The industry body has also urged DBT that the rate of weighted deduction should also be increased from a present rate of 200 per cent to 300 per cent, considering the long gestation period to break-even and R&D incentives globally offered by other countries.
The current tax incentive, 200 per cent weighted deductions is available to firms that are engaged in manufacturing or production. There is a sunset clause prescribed for availability of this incentive for expenditure incurred up to March 31, 2012.
“The uncertainty associated with outcome of R&D makes it a challenging task, especially where investments are high and anticipated return is low. Investments in R&D may not always fetch a high return immediately. Withdrawing the benefit of 200 per cent weighted deduction may prove to be a dampener to most industry players undertaking or proposing to undertake R&D in India,” ABLE said.
“In order to provide an impetus to R&D growth, the benefits of the weighted deduction should be continued beyond March 31, 2012,” the association requested.
According to Mr Utkarsh Palnitkar, Managing Director, Pluripotent Capital, said “tax incentives should continue for few more years. We need to create large pool of innovative entrepreneurs, who can later attract investors to the biotech sector.”