Japanese drugmaker Eisai Pharma plans to cut down investments towards its India manufacturing plant and may not go ahead with the phase II of expansion owing to the losses it may face due to the government imposed Minimum Alternate Tax system.
“We had invested around Rs 250 crore in the phase I and were planning to invest another Rs 100 crore towards the phase II. But, the company would rethink the decision as MAT may impact our revenues. And, we would rather consider Singapore to establish another facility,” said Sanjit Singh Lamba, managing director of the Eisai Knowledge Centre at Vishakapatnam.
Most of the companies, which have operations only in an SEZ and not outside have sought reprieve from the government and two cases pending in Madras and Andhra Pradesh High Courts regarding this matter. In fact, there are three to four major pharma companies in Andhra Pradesh alone facing the issue.
“Last year itself we had represented the case to the commerce ministry and the ministry is also of the view that foreign investments will be hampered along with a set back to the image of the country. The finance ministry would however have a final say on this, and we hope the issue will get the due attention during this budget session. Most of the affected pharma companies now plan to diversify their investment to other countries,” said P V Appaji, executive director, Pharmexcil (Pharma Exports Promotion Council).
It also said that other companies like Best Pharmaceuticals and Toyotsu Rare Earth from Japan are looking at relocating their facilities, if relief does not come soon. When it comes to Eisai, the company expects a Rs 200 crore turnover from the facility this year.
“But if we book a Rs 25 crore profits, almost Rs 5 crore would go towards MAT. Foreign companies with establishment outside SEZ can offset the tax,” said Lamba. The SEZ Act of February 2006 was inviting for commercial set ups but the MAT, the exemption for which was withdrawn from April last year, will ask for 18.5 per cent along with an education surcharge cess, counting together 20 per cent of book profits.
“We had invested around Rs 250 crore in the phase I and were planning to invest another Rs 100 crore towards the phase II. But, the company would rethink the decision as MAT may impact our revenues. And, we would rather consider Singapore to establish another facility,” said Sanjit Singh Lamba, managing director of the Eisai Knowledge Centre at Vishakapatnam.
Most of the companies, which have operations only in an SEZ and not outside have sought reprieve from the government and two cases pending in Madras and Andhra Pradesh High Courts regarding this matter. In fact, there are three to four major pharma companies in Andhra Pradesh alone facing the issue.
“Last year itself we had represented the case to the commerce ministry and the ministry is also of the view that foreign investments will be hampered along with a set back to the image of the country. The finance ministry would however have a final say on this, and we hope the issue will get the due attention during this budget session. Most of the affected pharma companies now plan to diversify their investment to other countries,” said P V Appaji, executive director, Pharmexcil (Pharma Exports Promotion Council).
It also said that other companies like Best Pharmaceuticals and Toyotsu Rare Earth from Japan are looking at relocating their facilities, if relief does not come soon. When it comes to Eisai, the company expects a Rs 200 crore turnover from the facility this year.
“But if we book a Rs 25 crore profits, almost Rs 5 crore would go towards MAT. Foreign companies with establishment outside SEZ can offset the tax,” said Lamba. The SEZ Act of February 2006 was inviting for commercial set ups but the MAT, the exemption for which was withdrawn from April last year, will ask for 18.5 per cent along with an education surcharge cess, counting together 20 per cent of book profits.
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