Union Budget 2025: Pharma Industry Seeks Tax Relief, Enhanced R&D Support, and Increased Healthcare Funding

resr 5paisa Research Team

Last Updated: 14th January 2025 - 04:38 pm

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Leaders in India's pharmaceutical and healthcare industries are hopeful that Finance Minister Nirmala Sitharaman will announce a significant increase in healthcare funding in the upcoming Union Budget 2025. The sector is also advocating for tax incentives to support research and development (R&D), particularly as companies shift their focus toward more advanced drug innovations.

Emphasis on R&D Support

Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, has stressed the importance of dedicating at least 10% of the National Research Fund to life sciences and reinstating the 200% weighted deduction on R&D expenses.

Similarly, Ameera Shah, Promoter and Executive Chairperson of Metropolis Healthcare, has called for greater incentives to support diagnostic technology R&D, aiming to position India as a global leader in healthcare innovation.

Calls for a Larger Healthcare Budget

The sector is pressing for increased budget allocations to enhance healthcare infrastructure. As the Union Budget 2025 approaches, these requests have taken on a renewed sense of urgency.

Himanshu Baid, Managing Director of Poly Medicure, emphasized the need to raise healthcare spending to 2.5-3% of GDP to foster innovation and expand access to medical services. Baid also recommended standardizing the Goods and Services Tax (GST) for medical devices at 12% to simplify taxation and facilitate business operations.

In addition, Baid proposed raising export incentives under the RoDTEP (Remission of Duties and Taxes on Exported Products) scheme from the current 0.6-0.9% to 2-2.5% to boost the global competitiveness of Indian medical devices.

Key Proposals from Hospitals and Diagnostic Firms

Hospital leaders have called for an Infrastructure Linked Incentive (ILI) scheme for new hospitals, reduced GST rates for essential services, and lower customs duties on advanced cancer treatments and medical devices.

Suneeta Reddy, Managing Director of Apollo Hospitals, noted that input GST increases costs by 8-10% and suggested lowering GST on services such as lease rentals, housekeeping, and manpower to 5%.

To address the shortage of hospital beds, Reddy proposed an ILI scheme similar to the Production Linked Incentive (PLI) framework. She suggested a 50% capital expenditure incentive for hospital projects with over 100 beds, which could be offset against tax liabilities to accelerate infrastructure development and improve patient care.

Recommendations from the Diagnostics Sector

Diagnostic firms have recommended raising the tax exemption limit for preventive health check-ups from ₹5,000 to ₹10,000 and extending the benefit to include multiple family members to promote a culture of preventive healthcare.

Conclusion

The healthcare sector's Union Budget 2025 expectations center around enhanced financial support, tax reforms, and policy initiatives designed to drive growth, innovation, and improved healthcare access throughout the country.

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