The Hindu Business Line : Fringe benefit still gives drug industry the chill

THE field-force intensive pharmaceutical industry is still in jitters over the fringe benefit tax (FBT), the Union Finance Minister, Mr P. Chidambaram's assurance notwithstanding.

Concern still prevails on whether North Block's intentions on not taxing a legitimate business expense will be translated to the bone when it comes to implementation on the ground.

"It is still a grey zone and leaves a lot of discretion at the doorstep of the officers on the ground. All contours need to be smoothened and the draft should be absolutely clear on what can be taxed and what not. The problem is that more tax on the companies would finally get passed onto the consumer," said Mr Ranjit Shahani, President, Organisation of Pharmaceutical Producers of India (OPPI). The OPPI is a platform for multi-national drug companies.

The first-aid has come, said another top executive with a domestic drug company. But the fever is yet to be treated. The word `collective' is still being used and this is open to interpretation and can lead to litigation.

How will the Government deal with per diem or payment given per day to employees when they travel to promote medicines, he asked.

In the pharma industry, about 15 per cent of a company's sales turnover is towards marketing and promotion of medicines, says Mr A.K. Jain, IPCA's Executive Director-Finance.

At 12 per cent of cost, Lupin spends about Rs 60 crore on its field-force, says Lupin's Chairman, Dr D.B. Gupta.

IPCA has a field-force of about 1,500 people, who travel about 20 days in a month, Mr Jain said.

The company has about 200 people in Russia, for instance. Cipla has a field-force of about 2,500 plus, of whom at least 500 travel abroad to market medicines. Lupin has a 1,200-strong field-force and about 150 of them abroad.

Pfizer has a 1,000 plus field-force. Nicholas Piramal, Ranbaxy, Dr Reddy's etc. all have large field-forces to support their business, an industry representative said.

Conveyance and foreign travel may not be treated as fringe benefits, but even skill upgradation programmes and welfare schemes should not get taxed, an analyst tracking the sector said.

How will the FBT look at a company's marketing officials who are based abroad? All this will simply generate more paperwork, bring in bureaucracy, discretion, litigation and eventually push up costs for the company, he observed. Something that will again be passed on to the consumer, he added.

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