09 May, 2015

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CAG Reports on Direct Tax Leakage by Pharma Sector

The Indian pharma industry has been resorting dodgy tax avoidance practices which include claiming exemptions for illegal freebies given to doctors, research work which was not taking place, and other tricks, reveals a new report of India's audit watchdog, the CAG. The report also takes to task the Income Tax Department for allowing these practices causing tax losses worth crores of rupees.


Taking an innovative approach to digging out the dirt on the flourishing pharma sector, Comptroller & Auditor General (CAG) asked the income tax department to show tax assessments of the whole pharma sector in India. The tax office had no database of pharma manufacturers and was able to produce only 2868 assessment records. These were put under the scanner by CAG and they found 246 cases involving tax deficiency of over Rs.1348 cr.


The biggest deficiency caught by the CAG related to claims of exemption for research and development (R&D) that were not valid. All kinds of tricks were being utilized to this end by pharma companies. Over Rs.570 cr worth of taxes were lost because companies were claiming exemption for R&D whereas in reality they had either not been granted permission by DSIR or such permission had expired.

Download the CAG Report



Source :- Times of India

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