Pre-budget 2017 expectations

Chemicals

Incentives for export units under make-in-India program: Government needs to incentivise the chemical unit set-up with new technology catering to export market to give boost to the exports in turn reducing the current account deficit.

Sooner rolling out of GST with capped rates: Sooner roll out of GST will reduce administrative burden of multiple taxes. This will potentially improve efficiencies and reduce costs. Capping of GST rates at 18% – 20% for chemical industry will have strong positive impact on the sector.

Rationalisation of Corporation tax: A reduction in corporation tax would lead to fund technology and modernisation which will lead to faster growth in longer run.

Rationalisation of taxes in SEZ: Government needs to rationalise taxes, especially removal of MAT, levied on the units located in SEZ which could also augment the make-in-India initiative.

Competitiveness of domestic players: Government should revisit the duty structure for the specific products where rationalisation is required for protection of domestic industries.

Technology transfer: Government should consider a budgetary allocation for partially funding technology which would help domestic industries for rising to the global standards. Simultaneously, government would also need to put a better patent protection roadmap in place to avoid infringement of technology.

Infrastructure: An allocation for building robust infrastructure to support clusters on a PPP model would help in smoother and timely completion of projects in such regions.

Skilled manpower: Government needs to invest in setting up skill based training institutes and more ITIs as players in the industry face short fall in availability of skilled manpower / chemical engineers.

Reduction in import duty on key feedstock and key inputs: Import duties on various substance like membrane cell plant, soda ash, PVC, EDC, and VCM should be reduced.

National Chemical Policy: National Chemical Policy is being proposed for a long period which needs to be formulated to provide enabling environment, infrastructure and duty structure for the Chemical industry in the country. It will place a framework for promoting safety & security and R&D in the sector. This will help India’s chemical industry to grow and become more competitive.

(Savan Godiawala – Partner, DTTILLP)

Life sciences and healthcare

Indian Clinical Research Organizations looking for specific indirect tax exemptions

The regulatory system is continuously being refined to facilitate entry of global clinical trial, and at the same time, ethical standards are introduced for ensuring protection of human rights; providing reasonable compensation to the trial subject; participation of the subject with consent and full scientific, medical justification to conduct the clinical trials.

However, in spite of the many principles and regulatory bodies, there is still a lot that needs to be improved to assure a better environment towards ease of doing business by the CROs in India.

From the Indirect tax point of view, Ministry of Finance (Department of Revenue) plays an important role in the regulation of CROs in India as from time to time they provide various exemptions in relation to customs duties/ Excise duties/ service tax as the case may be.

The costs of rendering clinical Trials/ Technical Testing or analysis/ Scientific and technical consultancy services has increased in manifold thereby making India a less sought after destination for such services.

To achieve optimum progress in the CRO’s, the sector needs upfront exemption on account of the following under the GST Regime:

1. Services related to drug discovery/development of analytical methods 
2. Research and development related to newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organization

Education

Given the massive investment requirements of the education sector to meet the growing demands of ever increasing population, the budgeted expenditure is clearly not enough.

• Increasing public expenditure: In line with the Kothari Commission’s recommendation to increase public expenditure to 6% of the GDP, the government is requested to announce a higher budgetary allocation this year. The funds can specifically be devoted towards improvement of physical infrastructure, research & development, teacher training & adoption of technology for improved learning outcomes.
• Removing roadblocks from foreign & private investment: The government has been actively promoting India as an ideal FDI destination for a number of sectors. We request the FM to provide clarity on government’s stand on attracting foreign & private investment in this sector through regulatory interventions.
• Separate deduction for tuition fees: The tuition fees across educational institutions have increased substantially in the recent years and bundling the tuition fees exemption under all-encompassing section 80C with a total deduction of Rs. 1.5 lakhs has not really incentivized higher studies. To encourage middle class households to pursue academic dreams, a separate section under the Income Tax Act should be provided.
• Re-examine withdrawal of service tax exemption: The government should consider restoring the service tax exemption on renting immovable property by an educational institution to a third party. Similarly, service tax levy should also be withdrawn from auxiliary education services such as transportation, canteen, etc. provided by educational institutions directly to students. The proposed GST regime should provide such exemptions to the education sector to encourage lower dropouts and higher enrolments.
• Other sectoral interventions: Investment in development of education leadership & faculty is the need of the hour. A roadmap for effective utilisation of funds under the mandatory CSR proviso can also be suggested.