India local tax break under fire

India's Ministry of Chemicals and Petrochemicals wants the closure of a tax loop-hole that is allowing the country's largest drugmakers to outsource production to zero-excise pockets of the country. Ironically, given the benefit that India has obtained from similar arrangements from global businesses, producers and politicians are queuing up to condemn the expansion of pharmaceutical production in Himachal Pradesh and Uttarachal, at the perceived expense of Gujurat, Andhra Pradesh and Punjab. The chief minis-ters of the three most affected regions have written to the federal Finance Ministry to demand an equalization of tax levels for businesses in the subsidized regions.

New tax "created" outsourcing incentive

According to local reports, the situation was exacerbated by the introduction in January last year of a Maximum Retail Price excise. It created an artificial incentive for drug firms to outsource to small production facilities in areas supported by national tax breaks. Two tax reforms are proposed, to halve the MRP to 8%, or raise the thresh-old for paying the tax for small units from 10.0 million rupees ($226,000) to 50.0 million rupees.