Research and development (R&D) Centres in India especially pharmaceutical, biotech and manufacturing companies went to Delhi Court as the government denied to provide tax benefits under GST.
R&D Centres, those wanted to establish businesses in India, the government had provided a three-year exemption under the previous tax regime. On the other hand, three- year exemption has been removed by the government only on raw-materials procured locally under the new indirect tax regime. Due to this, R&D Centres are facing tough times and they filed petitions against the government in Delhi High Court.
Earlier this week, GST rates have been reduced by the Council in its last meeting on domestically- procured raw materials from 18 percent to 5 percent. Abhishek A Rastogi, partner, Khaitan & Co, said, “R&D centres that wanted to set up operations in India were given a three-year exemption under the earlier tax regime, and to withdraw that under GST upsets operational capabilities of these companies.” He further added that “While the government has reduced the GST rates on domestic procurement from 18 percent to 5 percent, now, the test of constitutional validity still needs to be validated.”
Industry merchants said that the exemption has been removed by the government under GST to promote R&D Centres in India. Rastogi said, “The exemption for indigenous procurements for the promised period will boost the confidence of the domestic R&D units and make the Indian operations competitive.”
Aditya Mody, director of Devashish Polymers is running R&D unit,”Businesses were set up based on earlier regulation, and now we trust and hope that the issue will be resolved soon by the courts.”
MS Mani Partner at Deloitte India, said, “In the past, end-user-based exemptions have seen some misuse, hence the tax authorities will be extremely cautious about granting end-user-based exemptions and will prefer that the value chain is not broken at any stage.”
